Summary

 

Investors’ preference for high quality assets continues to benefit SGD bonds.

Last month, the US Fed paused on rate hikes but reiterated a hawkish stance and signalled higher for longer rates as inflation, while improved, remains too high for the central bank to declare victory. Coupled with US economic resilience and higher than expected debt issuances, the 10-year US Treasury yield sold off to hit a 16-year high before sliding a bit. The renewed hawkish tone has again filtered through to SGD bonds with 10-year SGS yield hitting a year high of 3.47% and yields on latest six-month T-bills crossed the 4% mark, the first time since January.

Singapore government bonds continue to offer relatively attractive yields among the highest-rated AAA-rated sovereigns. Meanwhile the SGD corporate debt market has seen lower new issuance volume this year, providing a supportive technical backdrop besides absolute yields that are trading at an attractive multi-year high. Investors’ preference for high quality assets in a stable currency continues to benefit SGD bonds; the Markit iBoxx ALBI Singapore Total Return Index has gained 0.41% year-to-date, up from -9.9% over the same period last year.

Eastspring’s Fixed Income team believes investor demand will remain healthy for SGD bonds, especially in the high-quality issuers’ segment. The team likes SGD credits for their relatively low volatility and stable credit fundamentals. Bond investors also stand to benefit from capital appreciation once the global easing cycle kicks in. As such, it is an opportune time to lock in the current higher bond yields in high quality issuers such as SGD government bonds and investment grade SGD corporate bonds.

The SGD bond market, which is one of the most advanced in the Asian region, can play a key role in stabilising investors’ portfolios, while providing an attractive level of income against a backdrop of elevated inflationary forces and slowing growth risks.

SGD bond yields are at multi-year highs

SGD bond yields are at multi-year highs

Source: Eastspring Investments, Markit iBoxx, Blackrock Aladdin, as at 30 September 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
Monthly Views June

in insights

Multi asset

Monthly Views June

19 Jun

We believe that US economic growth momentum will likely continue to decelerate, as ...

Why an Emerging Markets ex China strategy still holds value

in insights

Equity

Why an Emerging Markets ex China strategy still holds value

12 Jun | Navin Hingorani

A value-driven EM ex China strategy tends to outperform in the long term.

India elections: Key reforms likely to continue amid coalition dynamics

in insights

Equity

India elections: Key reforms likely to continue amid coalition dynamics

06 Jun

Key reforms are likely to continue as India’s new government navigates coalition ...

6 winners of supply chain shifts

in insights

Multi asset

6 winners of supply chain shifts

29 May

The rebalancing of global supply chains is a long-term theme which will offer new ...

Monthly Views May

in insights

Multi asset

Monthly Views May

21 May

Global economic activity in 2024 has been stronger than expected. Inflation data out ...

Why sustainable supply chains matter for investors

in insights

Multi asset

Why sustainable supply chains matter for investors

15 May

Making supply chains more sustainable can be a game changer for companies.

New anchors reshaping supply chains: Opportunities for investors

in insights

New anchors reshaping supply chains: Opportunities for investors

08 May | Bill Maldonado

Our pulse survey of 150 senior executives across North America, Europe and Asia ...

5 benefits of a low volatility strategy

in insights

Quantitative

5 benefits of a low volatility strategy

02 May

Going into the rest of 2024, investor sentiment may be affected by geopolitics and ...

2Q24 Outlook: Balancing shorter-term rewards against longer-term risks

in insights

Multi asset

2Q24 Outlook: Balancing shorter-term rewards against longer-term risks

24 Apr

If the US economy continues to perform well, the “goldilocks” scenario plays out for ...

Monthly Views April

in insights

Multi asset

Monthly Views April

24 Apr

Investment and asset allocation views driven by our Multi Asset Portfolio Solutions ...

Sources:
1 Year to date as at 30 Sep 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 (200001028634/ 531241-U) and Eastspring Al-Wara’ Investments Berhad (200901017585 / 860682-K).

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).