- US$ Government Securities yields and implied probabilities of future Fed rate hikes have fallen sharply. However, short-term interbank rates are higher and credit spreads wider indicating tighter financial conditions in the US. Singapore has seen similar moves on a smaller scale.
- Notwithstanding the decline in the discount rate so far, we maintain our NEUTRAL stance on S-REITs awaiting further loosening of financial conditions and/or better entry yields.
Macro cross-winds
- - Read this at SGinvestors.io -
- US investment grade and high yield credit default swap spreads widened 7.8bp and 36.4bp, respectively. Singapore has seen similar moves, albeit on a smaller scale. Singapore 10-year yield, key input in our discount rate, is down ~30bps from last week’s peak. Meanwhile, 3-month compounded SORA is up 5bps from last week.
- - Read this at SGinvestors.io -
- Our house view is unchanged. We expect the Fed to raise rates to 5.0-5.25% by mid-2023 and hold at that level before cutting in 2024. Likely peak of 3m SIBOR ~4.8%.
Key rate sensitivities
- Read more at SGinvestors.io.
