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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.
Posted 04 February 2021 by Rahul Sharma, Director - Indices, IHS Markit
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
