In a report dated March 10, DBS Group Research notes that the one-month Sora, Singapore’s benchmark rate, “appears to have already peaked in FY2024.” The rate is currently stabilising within a range of 2.4% to 2.5%, suggesting relative interest rate stability in the near term.
Ample liquidity and downward pressure on Sora are favourable for REITs, though other risks remain. Yields on 10-year Singapore Government Securities (SGS) fell to 2.62% as of March 10, a five-month low. Aside from a brief dip to 2.4% in September 2024, this is the lowest it has been in the past three years.
At the same time, the yield on the FTSE REIT Index is at 6.5%, a one-year high, giving a yield spread of almost 3.9%. This could cause S-REIT unit prices to rally to narrow the yield spread, as they have in past years.
