Investors flock to Singapore bonds as safe-haven demand surges

The global bond market is getting hammered. Long-dated government bonds everywhere are being dumped by investors, sending yields soaring. But Singapore? The place is doing the exact opposite.

While others bleed, Singapore’s bonds are holding up like a goddamn fortress.

Yields on 30-year debt this year have jumped around 45 basis points in the UK, 74 in Germany, and a full 100 in Japan. Japan’s long bond yield just hit a record high on Wednesday. Over in the UK, 30-year gilts are now at their highest levels in nearly thirty years.

These moves are being driven by fears of inflation, rate hikes, political instability, and giant fiscal holes. “Bond market performance year to date has indeed been dismal for developed markets, particularly UK gilts and JGB, owing to their adverse local dynamics,” said Winson Phoon, Head of Fixed Income at Maybank Securities.

Yields fall as Singapore bucks the trend

While the world panics, Singapore’s 30-year bond yield has dropped by about 75 basis points this year. That’s not a typo. Investors are piling into Singapore bonds, and that demand is pushing prices up and yields down. (Bonds move like that: prices up, yields down. And vice versa.)

“Investors who are concerned about a cooling global economy might find Singapore’s AAA credit rating and consistently conservative fiscal policy attractive,” said Yujun Lin, CEO of Interactive Brokers Singapore. And he’s not wrong.

The country is one of just nine on the planet to have a AAA rating from all three major credit agencies — S&P, Fitch, and Moody’s. That’s better than the U.S., which only has AA+ from S&P and Fitch. Japan? It’s sitting at A+ from S&P, four full notches below Singapore.

Unlike most places, Singapore is required by law to balance its budget over the term of a government. The constitution doesn’t allow reckless spending sprees. The country has no net debt. None.

“Our strong balance sheet explains why Singapore receives the top credit rating of AAA from the three leading international credit-rating agencies,” the government said in an official statement.

Inflows surge as inflation stays tame

When Singapore issues bonds, it’s not to patch holes in the budget, but rather to smooth out cash flow, support the local debt market, or help set price references for private debt.

While other central banks hike interest rates to fight price spikes, Singapore is doing it differently. It’s managing inflation with a different tool, the exchange rate. The Monetary Authority of Singapore (MAS) doesn’t set interest rates. It controls the strength of the Singapore dollar.

And when inflation gets hot, they let the currency surge, which makes imports cheaper, so then there is less inflation. And less inflation means bond yields stay low and real returns stay positive, with Singapore’s July inflation being just 0.6%, the lowest since January 2021.

All of this, the tight fiscal controls, the tame inflation, the AAA rating, is attracting a lot of money. Tan added that Singapore’s solid macro conditions have brought in big capital inflows, clearly visible in the currency. The Singapore dollar has surged about 5.46% against the U.S. dollar so far this year, per data from CNBC.

Phoon from Maybank also said demand has been rising fast. “Bids for Singapore bonds have turned more aggressive on pricing amid ample liquidity conditions,” he noted. There’s money chasing those bonds. And with the Monetary Authority of Singapore showing no signs of draining liquidity, yields have dropped hard and may stay down for a while.

No one’s saying Singapore is perfect. But in a year where most bondholders are getting burned, it’s one of the very few places offering safety, returns, and stability… all at once. And for global investors trying to hide from the storm, that’s hard to ignore.

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