The local risk-free rate is important to REIT investors because unit prices of REITs are affected by the 10-year SGS yield through the yield spread. In fact — and this is despite S-REITs looking increasingly overseas for assets — when listed and traded on the Singapore Exchange (SGX), S-REITs are inevitably impacted by local risk free rates as well as the risk-free rates of the geographies where their properties are located.
The yield on 10-year Singapore Government Securities (SGS), the so-called risk free rate, has retreated somewhat from its peak of 3.18% since mid-June.
