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Over the past two months, longer-term SGD rates were torn between elevated global interest rates and the fact that Singapore remains a haven with negligible fiscal risks. To be sure, SGD rates did pop materially higher in the first few weeks of the Middle East conflict and the correlation of 5Y SORA OIS with a basket of global rates was higher back in March (close to 0.9). However, as sentiment improved, the relationship weakened (20-day correlation now closer to 0.8), with SGD rates dropping faster than global rates. Directionally, we would expect longer-term SGD rates to still be impacted by global forces. However, the sensitivities to the US-Iran war appear to be lower now with market participants are hopeful that the Strait of Hormuz could start reopening in phases if a US-Iran deal gets struck.
We should also be cognizant that there are different dynamics at play in the frontend of the SGD curve. Liquidity still seems flush (MAS bill cutoffs are still relatively low) and there may be speculation that Singapore would benefit from haven flows (the pop in non-resident deposits seem to suggest this). Under these conditions, short-term SGD rates will stay anchored even as Fed cut pricing has been removed. That said, we are watchful that some of these dynamics could change. SGD rates are trading at a very wide discount relative to their counterparts, significantly more than what the SGDNEER slope (estimated to be around 1-1.5%) implies. A moderation of inflows as risk appetite improves further (reducing haven demand) or a meaningful tick up in loan-to-deposit (LDR) ratio could be early signs that short-term SGD rates could rise, independent of what the Fed does. Should that happen, there could be a parallel shift higher in rates out to the 10Y tenor.
In relative value terms, we note that SGSs are trading less rich compared to SORA OISs. However, the adjustment may not be done just yet and we still think that yields should trade at least flat to OIS rates over the medium term. 
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