As tapering approaches and the US Federal Reserve rolls back its bond buying programme, US dollar liquidity is impacted. This in turn drives up yields, including yields on the 10-year US treasuries. In Singapore, yields on 10-year Singapore Government Securities, although still low, have started to creep up to 1.7% as at Oct 13 compared with 0.9% a year ago.

REITs take their pricing off risk-free rates, which are usually yields on 10- year bonds. Hence, if these yields start to rise, the yields of REITs are likely to expand too. Everything remaining constant, unit prices are likely to fall to maintain the yield spread.

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