iBoxx SGD Monthly Update: February 2021
January 2021 End-of-Month Commentary
Pandemic woes continued through January with the vaccine narrative becoming more mixed. Some countries were seen to be making a success of their vaccine roll outs whilst others struggled with logistical and production issues. This coupled with concerns around variant strains led to curtailed risk taking. A number of major stock indices reflected the fluctuating uncertainty by giving up prior gains toward the latter end of the month.
However, despite the short-term choppy behaviour of stocks, government bond yields rose over the period. They seemed to be responding to the overall strengthening outlook for world economies as well as in response to perceived inflation risks. These global growth expectations were bullish for trade reliant Asian economies; particularly for countries like Singapore that have so far handled the virus comparatively well.
In Singapore, the government bond market followed global bonds with local yields rising 14 bps over the month. This sell-off in local govies significantly contributed to the MTD loss made by the overall iBoxx SGD index (-0.68%). Indeed the 5 worst performing bonds included long dated govies as well as sub-sovereigns. Elsewhere in the index, lower credit quality conversely performed well this month with the BBB sector making gains across the curve. The HY segment also posted a gain this month (0.48%).
The iBoxx SGD overall index ended the month offering a yield of 1.39% with a duration of 6.95 years.
February 2021 Rebalance
Four new bonds, including 3 corporates, entered the index at the February rebalance and inserted just over S$ 1.1 billion of new notional into the intermediate part of the curve.
Only one bond was removed from the index, deleting just over S$ 300 million of notional. This Real Estate Investment Services bond was removed as its maturity fell below 1 year.
Please refer to the table for rating changes observed at the February rebalance in the full commentary.
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