Periodic/Sector reports
REITs: New Normal Of Higher Bond Yields… Elsewhere
OVERWEIGHT (Maintained)
Analyst
Highlights
- The risk-free rate for our DDM is now based on each country’s 10-year government bond yield weighted by the REIT’s geographical disposition. Target prices for CICT, FCT, LREIT are relatively unchanged due to their outsized exposure to home base in Singapore at 93%, 100% and 91% respectively. Target price for CLAS was cut severely by 27.5% due to exposures to Australia (10.5%), the UK (11.5%) and the US (18.4%), while FLT was cut by 27.8% due to exposures to Australia (46.8%) and the UK (9.8%).
- Maintain OVERWEIGHT. BUY CICT (Target: S$3.06), MPACT (Target: S$1.71), NTTDCR (Target: US$1.29) and UIBREIT (Target: S$1.16).
Analysis
- US and Japan weathering fiscal strain. The US faces persistent budget deficits amounting to 6% of GDP, rising entitlement spending and annual interest costs exceeding US$1t, while government debt is projected to reach 142% of GDP by 2031. Japan has an even heavier debt burden at 233% of GDP in 2026, compounded by rising debt-servicing costs, an ageing population and a shrinking workforce. Expansionary spending and permanent tax cuts could further weaken Japan’s finances. Both the US and Japan face deteriorating fiscal sustainability. While not yet in a full-blown fiscal crisis, US treasury and Japan JGB yields are now structurally higher.
- Conversely, Singapore is recognised for its fiscal austerity and conservatism. The stable government bond yields in Singapore stand in stark contrast to rising yields in many developed countries, such as the US, the UK, France, Japan and even Germany. Singapore has attracted safe haven liquidity inflows, especially during periods of crises and uncertainties, reflecting the government’s fiscal conservatism and the country's financial and systemic resilience. Singapore's government has persistently generated budget surplus. Recurring net investment return contributions, which averaged S$25.1b over the past five years during 2021-25, accounted for about one-fifth of the government's annual operating expenditure. Singapore's safe-haven status has become even more internationally recognised in recent years.
- Singapore is an oasis of calm. Singapore 10-year government bond yield has risen by a smaller 24bp ytd to 2.36%, much more resilient compared to a larger increase of 63bp ytd to 4.80% for US 10-year treasury bonds and 82bp to 2.88% for Japan 10-year JGB.
Highlights
- The risk-free rate for our DDM is now based on each country’s 10-year government bond yield weighted by the REIT’s geographical disposition. Target prices for CICT, FCT, LREIT are relatively unchanged due to their outsized exposure to home base in Singapore at 93%, 100% and 91% respectively. Target price for CLAS was cut severely by 27.5% due to exposures to Australia (10.5%), the UK (11.5%) and the US (18.4%), while FLT was cut by 27.8% due to exposures to Australia (46.8%) and the UK (9.8%).
- Maintain OVERWEIGHT. BUY CICT (Target: S$3.06), MPACT (Target: S$1.71), NTTDCR (Target: US$1.29) and UIBREIT (Target: S$1.16).
Analysis
- US and Japan weathering fiscal strain. The US faces persistent budget deficits amounting to 6% of GDP, rising entitlement spending and annual interest costs exceeding US$1t, while government debt is projected to reach 142% of GDP by 2031. Japan has an even heavier debt burden at 233% of GDP in 2026, compounded by rising debt-servicing costs, an ageing population and a shrinking workforce. Expansionary spending and permanent tax cuts could further weaken Japan’s finances. Both the US and Japan face deteriorating fiscal sustainability. While not yet in a full-blown fiscal crisis, US treasury and Japan JGB yields are now structurally higher.
- Conversely, Singapore is recognised for its fiscal austerity and conservatism. The stable government bond yields in Singapore stand in stark contrast to rising yields in many developed countries, such as the US, the UK, France, Japan and even Germany. Singapore has attracted safe haven liquidity inflows, especially during periods of crises and uncertainties, reflecting the government’s fiscal conservatism and the country's financial and systemic resilience. Singapore's government has persistently generated budget surplus. Recurring net investment return contributions, which averaged S$25.1b over the past five years during 2021-25, accounted for about one-fifth of the government's annual operating expenditure. Singapore's safe-haven status has become even more internationally recognised in recent years.
- Singapore is an oasis of calm. Singapore 10-year government bond yield has risen by a smaller 24bp ytd to 2.36%, much more resilient compared to a larger increase of 63bp ytd to 4.80% for US 10-year treasury bonds and 82bp to 2.88% for Japan 10-year JGB.
OVERWEIGHT (Maintained)
Analyst
IMPORTANT NOTICE - DISCLOSURES AND DISCLAIMERS
This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at this link, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
