Summary

 

Investors preference for high quality assets will benefit SGD bonds.

At the start of the year, we highlighted the merits of investing in Singapore dollar (SGD) bonds against a backdrop of elevated inflationary forces and recessionary risks. Much has happened in credit markets since then but investors’ preference for high quality assets in a stable currency remains intact. This has and continues to benefit SGD bonds; the Markit iBoxx ALBI Singapore Corporates Total Return Index has gained 3.11 % year-to-date, up from -3.2% over the same period last year.

That said, the uncertainty over Fed hike expectations amid stubbornly high inflation prints and the US regional banking crisis resulted in periods of volatility and the market witnessed wild gyrations in US Treasuries with sharp intra-day moves. Singapore bond yields have risen in tandem with USD rates to multi-year highs. See chart below. Singapore government bonds continue to offer relatively attractive yields among the highest-rated AAA-rated sovereigns.

Several months of cooler US inflation data suggests that the Fed will likely pause on rate hikes. Barring a larger re-acceleration in inflation, the Fed is likely near the end of its tightening cycle and the US Treasury yields are close to their peak. Expectations are for the Fed to start cutting rates from early next year which will likely reduce upward pressure on global yields. As such, it is a good time to lock in higher bond yields in high quality issuers such as SGD government bonds and investment grade SGD corporate bonds. Bond investors also stand to benefit from capital appreciation once the global easing cycle kicks in.

The SGD bond market has seen lower new issuance volume in the corporate debt segment this year and absolute yields are trading at an attractive multi-year high. Therefore, Eastspring’s Fixed Income team believes investor demand will remain healthy for SGD bonds especially in the high-quality issuers’ segment. The team also likes SGD credits for their relatively low volatility and stable credit fundamentals.

Singapore bond yields have climbed to multi-year highs

the-yield-appeal-of-sgd-bonds

Source: Eastspring Investments, Markit iBoxx, Blackrock Aladdin, as at 30 June 2023. The Yield for the Markit iBoxx ALBI Singapore Index refers to its yield-to-maturity (YTM). The YTM calculation is a weighted sum of underlying bond yields in the index, which are priced according to sources from Blackrock Aladdin assuming that all coupon payments are reinvested at the same rate as the bond's current yield and takes into account the bond's current market price, par value, coupon interest rate and time to maturity.


Interesting reads

Know more
Red sweep: Implications for Asia and the Emerging Markets

in insights

Multi asset

Red sweep: Implications for Asia and the Emerging Markets

06 Nov

A Republican sweep is expected to lead to increased tariffs, higher bond yields and a ...

Why invest in Global Emerging Market equities now?

in insights

Equity

Why invest in Global Emerging Market equities now?

28 Oct | Samuel Bentley

The US Fed’s rate cutting cycles have historically correlated positively with ...

Q4 2024 Outlook: Preparing for uncertainty ahead

in insights

Multi asset

Q4 2024 Outlook: Preparing for uncertainty ahead

24 Oct

Eastspring’s Multi Asset Portfolio Solutions team anticipates a decelerating albeit ...

Monthly Views October 2024

in insights

Multi asset

Monthly Views October 2024

16 Oct

The upcoming US presidential election poses a risk to the market, with higher ...

Money Market

in insights

Money Market

14 Oct

Top Economic News

in insights

Multi asset

Top Economic News

14 Oct

Equity Market

in insights

Equity

Equity Market

14 Oct

Not all durations are equal

in insights

Fixed income

Not all durations are equal

09 Oct | Pierre-Julien Jandrain , Rong Ren Goh

Given that the Fed has begun easing rates, incorporating non-USD duration into bond ...

Low volatility: A remedy for the extremes?

in insights

Quantitative

Low volatility: A remedy for the extremes?

02 Oct | Chris Hughes , Michael (Xiaochen) Sun

Recent events are a strong reminder that volatility spikes are likely to continue and ...

Sources:
1Seven months ending 31 July 2023

This document is produced by Eastspring Investments (Singapore) Limited and issued in:

Singapore by Eastspring Investments (Singapore) Limited (UEN: 199407631H)

Australia (for wholesale clients only) by Eastspring Investments (Singapore) Limited (UEN: 199407631H), which is incorporated in Singapore, is exempt from the requirement to hold an Australian financial services licence and is licensed and regulated by the Monetary Authority of Singapore under Singapore laws which differ from Australian laws

Hong Kong by Eastspring Investments (Hong Kong) Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong.

Indonesia by PT Eastspring Investments Indonesia, an investment manager that is licensed, registered and supervised by the Indonesia Financial Services Authority (OJK).

Malaysia by Eastspring Investments Berhad (531241-U).

Thailand by Eastspring Asset Management (Thailand) Co., Ltd.

United States of America (for institutional clients only) by Eastspring Investments (Singapore) Limited (UEN: 199407631H), which is incorporated in Singapore and is registered with the U.S Securities and Exchange Commission as a registered investment adviser.

European Economic Area (for professional clients only) and Switzerland (for qualified investors only) by Eastspring Investments (Luxembourg) S.A., 26, Boulevard Royal, 2449 Luxembourg, Grand-Duchy of Luxembourg, registered with the Registre de Commerce et des Sociétés (Luxembourg), Register No B 173737.

United Kingdom (for professional clients only) by Eastspring Investments (Luxembourg) S.A. - UK Branch, 10 Lower Thames Street, London EC3R 6AF.

Chile (for institutional clients only) by Eastspring Investments (Singapore) Limited (UEN: 199407631H), which is incorporated in Singapore and is licensed and regulated by the Monetary Authority of Singapore under Singapore laws which differ from Chilean laws.

The afore-mentioned entities are hereinafter collectively referred to as Eastspring Investments.

The views and opinions contained herein are those of the author, and may not necessarily represent views expressed or reflected in other Eastspring Investments’ communications. This document is solely for information purposes and does not have any regard to the specific investment objective, financial situation and/or particular needs of any specific persons who may receive this document. This document is not intended as an offer, a solicitation of offer or a recommendation, to deal in shares of securities or any financial instruments. It may not be published, circulated, reproduced or distributed without the prior written consent of Eastspring Investments. Reliance upon information in this document is at the sole discretion of the reader. Please carefully study the related information and/or consult your own professional adviser before investing.

Investment involves risks. Past performance of and the predictions, projections, or forecasts on the economy, securities markets or the economic trends of the markets are not necessarily indicative of the future or likely performance of Eastspring Investments or any of the funds managed by Eastspring Investments.

Information herein is believed to be reliable at time of publication. Data from third party sources may have been used in the preparation of this material and Eastspring Investments has not independently verified, validated or audited such data. Where lawfully permitted, Eastspring Investments does not warrant its completeness or accuracy and is not responsible for error of facts or opinion nor shall be liable for damages arising out of any person’s reliance upon this information. Any opinion or estimate contained in this document may subject to change without notice.

Eastspring Investments companies (excluding joint venture companies) are ultimately wholly owned/indirect subsidiaries of Prudential plc of the United Kingdom. Eastspring Investments companies (including joint venture companies) and Prudential plc are not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America or with the Prudential Assurance Company Limited, a subsidiary of M&G plc (a company incorporated in the United Kingdom).