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REITs Sector Gaining Momentum Amid Lower Yield


REITs Sector Poised for Upside Amid Falling Yields

The REITs sector appears to be entering a recovery phase, supported by a favorable shift in the interest rate environment. As illustrated in the chart above, the NikkoAM-StraitsTrading Asia ex Japan REIT ETF (CFA) has started to rebound in tandem with the inverted Singapore 2-Year Government Bond yield, which has been trending higher—a proxy for lower actual yields.

This inverse relationship is a well-established dynamic in yield-sensitive asset classes such as REITs. As bond yields decline, the relative attractiveness of REITs improves due to their stable income profile and yield spread advantage over risk-free assets. Lower interest rates also ease refinancing concerns and support property valuations, contributing to improved investor sentiment across the sector.

From a technical perspective, the ETF appears to have found a base and is showing early signs of recovery, with the recent price action confirming a short-term bottom. If the downtrend in yields persists, we could see sustained accumulation and upward price momentum in the REITs space, particularly for those with strong fundamentals and resilient rental income streams.

In summary, the combination of softening yields and early technical strength presents a constructive backdrop for REITs. Investors looking for income and diversification may consider gradually increasing exposure to the sector, while traders may find tactical opportunities in REIT-related ETFs and counters aligned with this macro trend.

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