Singapore's Top-Rated Bonds Lifted by Pullback From US Treasuries

Asia's top-rated bonds in Singapore and Australia are getting a lift from rising questions about the appeal of Treasuries, as fears that a proposed US tax bill may hit foreign investors add to pressure following a recent ratings downgrade.

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MELBOURNE -

Strategists and portfolio managers are re-examining whether Treasuries are offering enough compensation, a rare challenge to the place of the world's largest bond market in global portfolios.

Taiwanese insurers are making plans to back away from US dollar assets, while Hong Kong pension funds have been told to draw up contingency plans for a further rating downgrade of the US.

"A huge amount of fiscal risk is not priced into US bonds - the downgrade, the fiscal package, investors stepping away from lending the US government money," said Schroders' head of fixed income Kellie Wood in Sydney.

"The potential for a fiscal misstep is increasing."

That is adding to the appeal of the world's dwindling supply of AAA-rated bonds. The spread between Australian 30-year bonds and equivalent Treasuries is around its narrowest level in a year, a sign that investors are putting more of their money into the Australian debt.