The financial-market turmoil triggered by US President Donald Trump’s tariff threats, coupled with Moody’s Ratings’ decision to cut the US credit ranking last month, is prompting investors to reassess the role of the dollar in the global economic system. Some are shifting money elsewhere, and Singapore is a popular destination given it’s the only sovereign in Asia with a AAA score at S&P Global Ratings.
“Getting the pickup from MAS bills on a swapped basis has always been a popular trade,” said Eugene Leow, a fixed-income strategist at DBS Bank in Singapore. Singapore’s government bonds, “given the AAA rating and prudent government finances, are proving to be very attractive for investors looking to diversify their holdings,” he said.
To hedge, a US-based investor can exchange US dollars for the Singapore currency in the spot market while simultaneously selling the latter in the forwards market.
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Investors are increasingly looking to shift assets away from the US due to growing doubts about whether Treasuries offer enough compensation after the recent ratings downgrade and concern that Trump’s proposed tax and spending bill will worsen America’s finances. When Moody’s downgraded the US in May, it warned that the country’s fiscal deficit, government debt and interest burden would all rise in coming years.
For its part, Singapore has been steadily increasing the size of its debt market. The amount of MAS bills outstanding climbed to $345.5 billion (US$268 billion) at the end of May, an all-time high based on data compiled by Bloomberg going back to 2011.
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There appears to be plenty of demand for the securities.
“There are still some investors out there who need triple AAA rated assets,” said Winson Phoon, head of fixed-income research at Maybank Securities. Given the record amount of MAS bills outstanding, it “looks like the inflows are still coming” in to Singapore, he said.
