Here's why SREITs will be immune from rising interest rates over the next 12 months

They have a high portion of fixed-rate debt.

The 13 Singapore Real Estate Investment Trusts (S-REITs) that Moody's rates are insulated from rising interest rates over the next 12 months because more than half of their outstanding debt is tied to fixed interest rates.

Here's more from Moody's:

They also have a weighted average debt maturity profile of more than two years, and just 18% of their total debt will come due over the next 18 months.

High Portion of Fixed-Rate Debt
All companies with borrowings on a floating-rate basis, including the S-REITs, are exposed to interestrate fluctuations.

The expectation of rising interest rates, which are likely to reduce borrowers’ ability to pay outstanding obligations, played a part in our recent decision to revise the Singapore Banking System Outlook to negativein July.

Given the forward-looking nature of financial markets and recent discussions on the US Federal Open Market Committee about plans to scale back its monetary easing measures, yields on long-term US Treasuries started to rise in May.

By late August, the yield on ten-year US Treasuries had picked up to 2.8%, an increase of around 115 basis points since the start of May.

Yields on 10-year Singapore government securities, which track US Treasuries, also rose to 2.77% on 24 June, the highest level in two years, but dipped to 2.67% by 30 August.

S-REITs mitigate interest-rate fluctuation risk by tying more than half of their outstanding debt to fixed interest rates, either by issuing fixed-rate bonds or swapping variable-rate borrowings to fixedrates through financial derivatives such as interest-rate swaps.

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