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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.
Posted 07 January 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.
