Investors pivot to S-REITs, bank stocks as T-bill yields drop to 1.8%: analyst

The report said Singapore-listed REITs (S-REITs) and major local banks are well-positioned to absorb this liquidity shift.

As T-bill yields fall to 1.8%, investors are reallocating capital in search of stronger returns, with Singapore REITs and bank stocks emerging as prime beneficiaries.

According to the latest strategy note from DBS Group Research, a “wall of money” is moving toward higher-yielding assets, especially those offering yields above 6%.

The report said Singapore-listed REITs (S-REITs) and major local banks are well-positioned to absorb this liquidity shift.

S-REITs are currently trading at a forward yield of 6.0% and 0.88 times price-to-book, whilst banks are offering dividend yields of up to 6.5% for FY25F, with potential upside in FY26F.

DBS said approximately $100b in liquidity could be seeking alternatives to government securities, and even a 10% reallocation could mean $10b flowing into REITs and bank equities.

The firm expects retail investors to favour well-known names with strong local assets, such as KREIT, LREIT, SGREIT, ESR REIT, and FEHT.

This trend comes at a time when REITs are expected to rebound. As short-term rates begin to decline, many REITs with floating-rate debt are expected to benefit from reduced financing costs, improved hedging terms, and eventual DPU (distribution per unit) recovery, particularly from 2Q25 onward.

Singapore banks, whilst facing slight net interest margin compression, are expected to remain resilient. DBS noted lower deposit costs and rising income from wealth management — buoyed by record AUM and strong net inflows — are helping offset headwinds. Ongoing share buybacks are also supporting stock valuations.

Both sectors have delivered solid total returns in the first half of 2025, with S-REITs up 3% YtD and banks holding steady. Looking ahead, DBS projects annualised returns of 10% to 13% for both segments from 2025 to 2026, as lower rates help equalise performance between the two.