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Whilst global stocks, in general, rallied over February (given
vaccine distribution efforts and stimulus package expectations), it
was not a good month for bonds.
As fixed income markets priced in higher growth and higher
inflation expectations, most bond indices declined during the
month. Yields rose and curves bear steepened over the period. In
the US, for example, 10yr CMT yields rose over 40 basis points
whilst the 2s10s CMT curve steepened 30 basis points.
In the SGD bond market, average yields also rose (approx. 30
bps) with the overall iBoxx SGD index registering a loss of -1.92%
for the month. Government and sovereign related SGD bonds performed
the worst, particularly at the long-end of the curve. Shorter-end
BBB bonds made some gains that were offset by losses at the
intermediate maturity segment.
Within IG, all 10+ year buckets registered losses apart from the
BBB bucket that is composed of a single Keppel Corp 20-year bond
(it was in fact the 5th best performing bond in the overall index
this month). The HY index landed in positive return territory but
only by a whisker.
The iBoxx SGD overall index ended the month offering a yield of
1.69% with a duration of 6.74 years.
March 2021 Rebalance
Only one new bond (from the Real Estate Investments and Services
sector) entered the index at the March rebalance, inserting S$62.5
million* of new notional at the 10 year part of the curve.
Six bonds (with expected remaining lives less than a year) were
removed from the index. These removals deleted just over S$1.3
billion of notional*. The removals included a S$900 million Housing
and Development Board bond as well as some Real Estate related
Financials.
Please refer to the table for rating changes observed at the
March rebalance in the full commentary.
Posted 04 March 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.
