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iBoxx SGD Monthly Update: July 2021
June 2021 Performance
June saw the Fed acknowledge inflation and convey a more hawkish tone at its mid-month meeting. Whilst it still sees inflation as mostly temporary, it has raised its outlook for prices as reflected in its forecasted "dot plots" for future short-term US interest rates. This led to the US Treasuries 2s10s curve flattening somewhat over June, breaking its steepening trend that began at the start of the year.
In Singapore, whilst SGS yields rose in June, the government 2s10s curve spread has remained fairly stable in recent months having also steepened significantly earlier in the year. On the economic front, the IHS Markit Singapore PMI data has been encouraging with the latest survey readings showing business conditions have improved for the 6th straight month. This month, Singapore also eased Covid-19 related restrictions in a staggered two phased re-opening, providing much relief to consumer and travel related sectors.
With the rise in government yields and only a partial offset from non-Sovereigns, the iBoxx SGD Overall index made a loss of -0.10% over June. Returns were mixed across maturity and rating buckets but higher credit quality bonds underperformed across much of the curve and longer dated A and BBB sectors made gains, as did the High Yield sub-index. The overall index closed the month yielding 1.79% with a duration of 6.95 years.
July 2021 Rebalance
Ten new corporate bonds added a combined notional of S$ 2.2 billion to the overall index during this rebalance. These insertions mainly added risk to the intermediate part of the curve.
Six corporate bonds were removed from the index (due to each of their expected remaining lives falling below one year), resulting in S$ 1.675 billion of notional leaving the index.
Please refer to the full report for rating changes observed at the July rebalance.
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