SORA rate for REITS - Dividend Machines by The Fifth Person

Q&A › Category: REITs › SORA rate for REITS

Mei Ying Lee asked 1 year ago

Hello, One of the things to consider for REITs is whether there is a rise in interest rates, affecting the debt burden on the REITs. I am aware that now SG is using SORA. But there seems to be different "types" of SORA eg 1-month SORA, 3-month SORA, 6-month SORA. I am referring to this website: https://eservices.mas.gov.sg/statistics/dir/DomesticInterestRates.aspx Which SORA should we be using for REITs or it does not matter, and what is the difference between the different SORA? Thanks!

1 Answers

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Rusmin Ang Staff answered 1 year ago

Hi Mei Ying,

I'm not a banking expert but I see 3-month SORA is more commonly used. I think the rate is less volatile as compared to one month SORA. So REIT will prefer a more stable rate to get better clarity on their interest expense and distribution. Everyone tends to focus on Fed fund rate since it can influence global interest. Singapore's SORA tends follow the direction of Fed rate.

Mei Ying Lee replied 1 year ago

Thanks Rusmin!