Impact of Rising US Treasury Yields on Singapore's Economy and Additional Support Measures

Mr Saktiandi Supaat asked the Prime Minister and Minister for Finance regarding sustained increases in US Treasury yields (a) how Singapore's borrowing costs and credit availability could change; (b) which households and businesses are most exposed; (c) whether additional support is needed; and (d) how public-sector Treasury holdings' value, income and risks could change, including those managed by MAS and GIC.

The Minister for National Development (Mr Chee Hong Tat): Mr Speaker, interest rates in Singapore are market-determined and generally track the interest rates in the major economies. They have not risen as much compared to other jurisdictions. This reflects, among other factors, Singapore's strong fiscal fundamentals, which have supported continued healthy demand for Singapore Government Securities (SGS).

Singapore's borrowing costs have remained broadly in line with historical levels. The prevailing 10-year SGS yield stands at 2.5%, compared to its 10-year average of around 2.2%. The discount of 10-year SGS to 10-year US Treasury yields has widened, from about 170 basis points in January 2025 to about 250 basis points in September 2026.

Broader domestic credit conditions remain conducive. The three-month compounded Singapore Overnight Rate Average (SORA), which is an important benchmark for domestic loans, is around 1.2%, below its 10-year average of 1.5%. Credit growth remains firm, credit quality is sound and banks are well capitalised.

The stress tests conducted by the Monetary Authority of Singapore (MAS) indicate that businesses and households generally remain in a sound financial position to manage higher borrowing costs.

Businesses and households, particularly those who are more vulnerable, should exercise financial prudence by borrowing within their means, maintain adequate liquidity buffers and factor in the possibility of higher interest rates going forward.

MAS has safeguards to ensure that households do not over-extend themselves when taking out housing loans. The Total Debt Servicing Ratio framework caps a borrower's total monthly debt repayments at 55% of monthly income. For specified public housing purchases, the Mortgage Servicing Ratio also caps mortgage repayments at 30% of monthly income.

Importantly, banks assess whether borrowers can afford a housing loan at an interest rate of 4%, even when prevailing mortgage rates are lower. So, there is some buffer against increases in interest rates.

In addition, about 60% of Housing and Development Board (HDB) households with outstanding loans have concessionary HDB loans. The impact of rising interest rates is mitigated by the peg of the HDB mortgage loan to the Central Provident Fund (CPF) Ordinary Account interest rate, which provides greater stability against movements in market mortgage rates.

Sir, MAS works closely with financial institutions to monitor borrowers' repayment performance and facilitate early engagement if signs of financial stress emerge. Banks may offer assistance tailored to the individual circumstances. Borrowers who anticipate difficulty servicing their loans should approach their lenders early to discuss options.

The Government stands ready to provide appropriate and targeted support if necessary. In September 2026, we raised our risk-share for eligible Enterprise Financing Scheme loans from 50% to 70%, improving access to working capital and project financing.

Singapore's reserves are managed over a long-term investment horizon and diversified across asset classes. A gradual adjustment of yield increases will be manageable in a diversified portfolio that is held for the long term.

Mr Speaker: Mr Saktiandi Supaat.

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mr Speaker, I would like to thank the Minister for his answers to almost all of my Parliamentary Questions. But I have got two supplementary questions.

My first supplementary question is in relation to whether the Minister or MAS sees any shifts in global investor demand for Singapore dollar bonds as US Treasury yields remain elevated. Could such shifts create opportunities or constraints in our efforts to deepen our bond market and widen longer-term financing options for Singapore businesses?

Secondly, we are aware that US Treasury yields have risen more than 100 basis points since end of last year or beginning of this year. The Minister has assuaged concerns that our rates have actually remained quite low. But I think with US Treasury yields being elevated and at risk of going a bit slightly higher, the potential of it affecting our longer-term rates here in Singapore, from what the Minister has highlighted is somewhat mitigated for now. Can the Minister share what is potentially the short- to medium-term outlook that MAS has now? I think Minister has already mentioned about the mitigating measures, but the outlook for the risk and outlook for mortgage rates in Singapore.

Mr Chee Hong Tat: Mr Speaker, I will address the second question first. If I heard it correctly, I think Mr Saktiandi is asking if the US Treasury yields remain elevated, what is the impact on the SGS, our bond market and also, our cost of borrowing.

Sir, if you look at the situation in Singapore, we are not detached from what is happening in the US and other major markets. If the rates in the US were to rise, there will be an impact on the borrowing cost here in Singapore. What I mentioned in my main reply is that because of the strong fiscal position of the Singapore Government, the SGS, when we issue the demand for these securities, and in the case of the Singapore dollar bond market, the demand remains strong.

And beyond SGS, if you look at the Singapore dollar corporate bond issuances, even though there is heightened volatility in the global markets, the issuances in Singapore remain very well-received. The issuances amounted to $28 billion year-to-date and they are on track to surpass the issuance from last year.

The Singapore dollar bond market also provides an avenue for funding infrastructure projects, including in Singapore and the region. And today, some part of it is being allocated already for these projects.

So, overall, I would say that Singapore remains very focused on closely monitoring what is happening in the US and other major markets, because there is an impact on the borrowing cost, our interest rates here in Singapore. But because of our strong fiscal position, and the trust and confidence that investors have in Singapore's market, in our bond market, I think overall we are alright.

Mr Saktiandi also asked about the impact, if there is a rise, if I understood the Member correctly, what will happen to MAS' portfolio. Sir, for MAS, we have a very diversified portfolio where we invest our official foreign reserves. And these are across different asset classes and currencies. We are able to tap different sources of liquidity if individual markets are stressed. And I think this is something that we will continue to do.