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iBoxx SGD Monthly Update: January 2021
December 2020 End-of-Month Commentary
With vaccine deployment on the way, December was a good month for major equity and commodity markets. Some US equity market barometers even reached all-time highs at year-end. Global credit spreads were range bound during the month and government yields remained anchored at very low levels. Implied US equity volatility remained slightly elevated compared to the previous year-end.
In Singapore, the economy continued to get back on track during December even though it was expected to contract just shy of 6% over the whole of 2020 (the first annual contraction since 2001, as measured by GDP). Very few virus cases were reported during the month, allowing for the "phase 3" re-opening of the city after Christmas. This boosted market sentiment and expectations for 2021.
In the Singapore local bond market, positive returns over December were observed almost entirely across the board (by rating and maturity). Generally speaking, lower credit quality performed better with:
- Non-Sovereigns outperforming government bonds
- High yield outdoing investment grade
- Longer dated BBB bonds faring particularly well
The iBoxx SGD overall index delivered gains of 0.24% for the month resulting in final YTD performance of +7.35%. It closed the year offering a yield of 1.27% with a duration of 7.10 years.
January 2021 Rebalance
Five new bonds entered the index at the January rebalance, inserting S$ 1.3 billion of new notional across the curve. Three insertions were from the Real Estate sector.
Only one bond was removed from the index, deleting S$ 170 million of notional. This China issued SGD Real Estate bond was removed as its maturity fell below 1 year.
Please refer to the table for rating changes observed at the January rebalance in the full commentary.
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