“The club of countries with AAA ratings from S&P, Moody’s, and Fitch is small,” strategists at TD Securities, including Andrew Kelvin, wrote in a research note. “We could see some investment flows diverted from Canada” to those that retain the ratings and have positive nominal 10-year bond yields, they said.
That would be Australia, Norway and Singapore, TD Securities said.
Among AAA rated 10-year government bonds, Singapore offers the highest yields both on a nominal and inflation-adjusted basis, according to data compiled by Bloomberg. Its benchmark 10-year bond yielded 0.94% Wednesday, implying a real yield of 1.44%.
While Australia’s debt has the second-highest in nominal terms, its real yield is below what Switzerland offers, the data show.
Singapore’s central bank uses the exchange rate, rather than a policy rate, to control inflation, so weak consumer prices don’t necessarily correspond with low bond yields. That helps support the nation’s real yields.
