Why Singapore Dollar Bonds Are a Strategic Buy in a De-Dollarized World

The world is recalibrating its financial compass. For decades, the U.S. dollar reigned unchallenged as the bedrock of global trade, reserves, and investment. But the tectonic shifts of the past two years—spurred by fiscal uncertainty in Washington, aggressive tariff policies, and a broader reevaluation of risk—have accelerated a quiet but profound trend: de-dollarization. According to a report by J.P. Morgan, the dollar’s share of central bank reserves has fallen to a two-decade low, a decline driven by nations and investors seeking alternatives to a currency once deemed invincible [3]. In this evolving landscape, Singapore Dollar (SGD) bonds have emerged not just as a safe harbor but as a strategic asset for yield optimization and portfolio resilience.

The De-Dollarization Imperative

The erosion of the dollar’s dominance is not a sudden collapse but a gradual reallocation. Data from the International Monetary Fund (IMF) reveals that the U.S. dollar’s share of global foreign exchange reserves has dipped below 60% for the first time since the early 2000s [3]. Meanwhile, the demand for U.S. Treasuries—long the gold standard of safe assets—has waned. Over the past 15 years, foreign ownership of Treasuries has declined steadily, as investors pivot toward markets offering comparable safety with less geopolitical exposure [3].

This shift is not merely theoretical. Central banks in Asia, the Middle East, and even parts of Europe are diversifying their reserves into currencies and assets perceived as less entangled in U.S. policy volatility. For investors, the message is clear: the era of dollar hegemony is giving way to a more fragmented, multipolar financial order.

SGD Bonds: A Case for Stability

Enter the Singapore Dollar. While the SGD’s global profile may pale in comparison to the greenback, its credentials as a safe-haven asset are formidable. Singapore’s AAA credit rating from S&P and Moody’s, coupled with its robust fiscal discipline and politically stable governance, has made SGD bonds a magnet for capital seeking refuge from turbulence [1].

Historical performance underscores this appeal. During the Global Financial Crisis, the 2015 Chinese stock market correction, and the 2020 pandemic, SGD bonds consistently outperformed other emerging-market debt, preserving capital while delivering steady returns [1]. Their low correlation with equities and other high-yield assets further enhances their utility in diversified portfolios. As one UBS analyst notes, “In a world where uncertainty is the new normal, SGD bonds offer a rare combination of safety and liquidity” [4].

Yield Optimization in a Low-Yield World

Critics may argue that SGD bonds lag behind U.S. Treasuries in yield. A dollar-hedged 10-year SGD bond currently offers around 4.15%, compared to the 10-year Treasury’s 4.5% [2]. But this gap is narrowing—and for good reason. As de-dollarization gains momentum, investors are willing to accept lower yields in exchange for reduced exposure to U.S. fiscal risks.

Moreover, the liquidity of SGD bonds cannot be overstated. Singapore’s bond market, though smaller than its U.S. counterpart, is deep and efficient, with high bid-to-cover ratios in primary offerings and strong secondary market activity [1]. Cross-currency swaps also make it easier for global investors to hedge currency risk, effectively bridging the yield gap while preserving the SGD’s safety premium [2].

Strategic Allocation for the Long Term

The strategic case for SGD bonds is not just about avoiding risk—it’s about capturing opportunity. In a de-dollarized world, investors must balance the need for safety with the imperative to optimize returns. SGD bonds, with their strong macroeconomic underpinnings and proven track record, offer a compelling middle ground.

Consider the broader context: as central banks and institutional investors rebalance portfolios away from dollar-centric assets, the demand for alternatives like SGD bonds is likely to outpace supply. This dynamic could drive yields lower over time, locking in attractive returns for early adopters.

Conclusion

The de-dollarization narrative is no longer speculative—it is operational. For investors navigating this transition, SGD bonds represent a rare convergence of safety, liquidity, and strategic alignment with global trends. As Eastspring Investments aptly puts it, “In a world where the dollar’s dominance is being questioned, Singapore’s currency stands out as a beacon of stability” [1].

In the end, the question is not whether the dollar will retain its crown, but how investors will adapt to the new order. For those seeking to future-proof their portfolios, the answer may lie in the Lion City’s bonds.

Source:
[1] SG60 Spotlight Stand up for SGD bonds, [https://www.eastspring.com/insights/deep-dives/sg60-spotlight-stand-up-for-sgd-bonds]
[2] Singapore bonds lure buyers despite turning expensive, [https://sg.finance.yahoo.com/news/singapore-bonds-lure-buyers-despite-203730142.html]
[3] De-dollarization: The end of dollar dominance?, [https://www.jpmorgan.com/insights/global-research/currencies/de-dollarization]
[4] Ways to "de-dollarize" in APAC | UBS Singapore, [https://www.ubs.com/sg/en/wealthmanagement/insights/marketnews/article.2462867.html]