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iBoxx SGD Monthly Update: May 2021
April 2021 End-of-Month Commentary
April was mostly a good month for risky assets as market news focused on the early days of the Biden administration and the strides made in vaccinating people across the world against Covid-19.
Most equities and commodities markets made gains and implied volatility was tame. Perhaps surprisingly, US Treasury yields reversed their recent trend and fell significantly (predominantly, over the first half of the month), even as economic data came in strong.
In Singapore, local bonds also rallied, with yields falling around 10 basis points (on average) over the course of the month. The following key observations were gleaned from the index data:
- Singapore government bonds outperformed non-sovereign bonds
- High yield outperformed investment grade
- Gains were made in most of the maturity-by-rating cells, where longer dated, high credit quality bonds performed the best (see heat-map table below)
- A heavy loss was incurred in the A/3-5yr bucket, driven by a Huarong Finance 2017 Co Ltd bond that was under distress this month
The iBoxx SGD overall index ended the month offering a yield of 1.86% with a duration of 6.73 years.
Despite growing optimism in many parts of the world on slowly overcoming the pandemic, the surge of cases in India was a sobering reminder of the risks that remain. These risks were also realised in Singapore as new clusters began to emerge in the final days of April.
May 2021 Rebalance
Only one new bond entered the index this rebalance: a perpetual S$ 1 billion corporate bond, issued by SingTel Group Treasury Pte Ltd.
Four bonds were removed from the index as their expected remaining lives each fell below 1 year. S$6.825 billion of notional was removed from the index in this manner including S$5.6 billion leaving via a Singapore Government Bond.
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