The MAS’s fight against inflation has been supportive for local debt as the authority uses the exchange rate rather than interest rates. This is in stark contrast with other bond markets that have seen yields soar on higher policy rates. Limited supply of government securities has also augured well for Singapore’s market unlike others such as the UK, where unfunded tax cuts sparked a meltdown in gilts.
The Monetary Authority of Singapore’s reliance on exchange rate as the monetary policy tool to fight inflation is bringing rich dividends for bond investors.
The city state’s sovereign bonds have gained 1.9% in October, the most since April 2020 and are the third-best performers among the 24 markets that make up the FTSE Russell’s World Government Bond Index. Yields on Singapore’s two- and five-year notes have fallen faster than other tenors.
