Singapore benchmark rates have started to decline
After a steady climb since early 2024, Singapore benchmark rates have fallen after peaking in April. Benchmark rates across various tenors have dropped since the peak, with the 2-year, 5-year, and 10-year Singapore Overnight Rate Average Overnight Indexed Swap (“SORA-OIS”) falling by around 80 to 90bps to 2.54%, 2.42%, and 2.50% respectively (as of 15 August).
The movement in Singapore sovereign bond yields mirrored that of the benchmark rates, particularly the longer-tenor bonds. Since their peak in May, the 2-year, 5-year, and 10-year Singapore Government Securities (“SGS”) yields fell by around 65 to 75bps to 2.75%, 2.72%, and 2.80% respectively. Meanwhile, the shorter tenor 6-month and 1-year Singapore Treasury Bills (“SITB”) also experienced a drop in yield to around 3.34% and 3.29% respectively (as of 15 August). With short-term yields staying elevated and higher than their longer-term counterpart, the Singapore sovereign curve remains deeply inverted.
Singapore’s benchmark rates largely follow the trajectory of rates by major central banks, particularly the US, and are also influenced by foreign exchange fluctuations. As such, the recent drop in yields across Singapore sovereign bonds reflected the plunge in US treasury yields - fueled by a surge in Fed rate cut expectation following a series of lacklustre US labor market data and soft inflation reading. At the moment, markets have priced in four Fed rate cuts by end of the year, with the expectation of one to two cuts in September’s FOMC meeting. This was a far cry from last month’s expectation of two rate cuts by end-2024 and just one cut in September’s meeting.
Chart 1: Singapore benchmark rates have fallen in recent months
Chart 2: Longer-tenor SG sovereign bond yields have closely mirrored the trajectory of benchmark rates
Chart 3: SG sovereign curve remains deeply inverted
Has this dimmed the appeal of SGD bonds?
Singapore T-bills shine amidst the equity market carnage
While the drop in Singapore benchmark rates has put pressure on yields of SGD sovereign bonds, we still favor the SITB which remain as a good option for risk-adverse investors. In light of the recent equity market carnage, SITB can provide good portfolio diversification and dampen volatility through its risk-free nature. Having a short tenor also allows SITB to act as a temporary safe harbor for investors to shelter their investments from the market gyrations.
With an inverted Singapore sovereign curve, SITB continues to offer a higher yield over the longer-tenor SGS. For instance, a 12-month SITB would provide a 50bps yield pickup over a 10-year SGS, offering investors the chance to pocket higher yield without the excess price volatility from the additional duration.
At a yield of around 3.3% (6M and 1Y SITB), SITB continues to offer decent yield opportunity when viewed across history and against other risk-free options of similar tenor. One such option is bank fixed deposits, which have seen rates decline as well. For comparison, major banks offer rates of between 2.8% to 3.25% for 12-month fixed deposits in July, across various minimum deposit amount (generally above SGD 10K) which is much larger than the minimum investment amount for SITB.
Treasures can be found across SGD corporate universe
While credit spreads have tightened across the SGD corporate bonds since the start of 2024, yields remain decent on aggregate and are generally higher than the past decade. We believe SGD corporate bonds continue to offer good opportunities for investors looking to pocket higher yields than sovereign bonds. Below we highlighted some of our favourite offerings at the moment, categorised for various profiles of investors -
For short-duration options, we like
- STRTR 3.750% 29Oct2025 Corp (SGD) and STRTR 4.100% 04May2026 Corp (SGD) offer close to 4.5% yield for under two years to maturity – one of the higher yielding short duration SGD bonds. Alternatively, GUOLSP 3.290% 26Oct2026 Corp (SGD) and GUOLSP 4.050% 04Jun2027 Corp (SGD) offer above 4% yield for two to three years to maturity.
- OUECT 3.950% 02Jun2026 Corp (SGD), one of the highest yielding investment-grade rated SGD REIT issuances.
- DB 5.000% 05Sep2026 Corp (SGD), an investment-grade rated bank bond boasting high coupons and near 4.2% yield to maturity (and 3.9% yield to call).
Issues | Bond Issuer | Ask Price | Years to Maturity/ Next Call | Yield to Maturity/ Next Call (% p.a.) |
The Straits Trading Company | 99.10 | 1.20 | 4.53 | |
The Straits Trading Company | 99.45 | 1.71 | 4.44 | |
OUE CT Treasury | 100.20 | 1.79 | 3.83 | |
Deutsche Bank | 101.13 | 2.05/ 1.05 | 4.18/ 3.90 | |
GLL IHT | 98.40 | 2.19 | 4.06 | |
GLL IHT | 100.15 | 2.80 | 3.99 | |
Sources: Bondsupermart, Bloomberg Finance L.P., iFAST Compilations. Data as of 15 August 2024. | ||||
For mid to longer-duration options, we like
- GUOLSP 4.400% 27Jul2028 Corp (SGD) and STRTR 4.700% 24Jan2029 Corp (SGD)which offers around 4% – 4.5% yield for a similar tenor of 4 – 4.5 years.
- BNP 4.750% 15Feb2034 Corp (SGD) and CMZB 6.500% 24Apr2034 Corp (SGD) are IG rated bonds that offer around 4.3 – 5.2% yield and has a tenor of more than nine years but are callable in 4.4 more years. BNP Paribas’ 2034 bond is rated “BBB+” by S&P ratings while Commerzbank’s 2034 bond is rated “Baa3” by Moody’s ratings.
Issues | Bond Issuer | Ask Price | Years to Maturity/ Next Call | Yield to Maturity/ Next Call (% p.a.) |
GLL IHT | 101.40 | 3.95 | 4.01 | |
The Straits Trading Company | 100.95 | 4.46 | 4.46 | |
BNP Paribas SA | 102.4 | 9.50/ 4.50 | 4.29/ 4.15 | |
Commerzbank AG | 106.75 | 9.69/ 4.44 | 5.21/ 4.79 | |
Sources: Bondsupermart, Bloomberg Finance L.P., iFAST Compilations. Data as of 15 August 2024. | ||||
For retail investors, we like the following Astrea bonds
- ASTLC 3.000% 18Mar2031 Corp (SGD) - Class A-1 - Retail and ASTLC 4.350% 19Jul2039 Corp (SGD) - Class A-1 - Retail. Both bonds have strong credit rating and offer one of the highest yields within the limited SGD retail bond space.
- We expect ASTLC 3.000% 18Mar2031 Corp (SGD) - Class A-1 - Retail to be redeemed early on its mandatory call date. In addition to the yield, investors will earn an additional 0.5% bonus redemption of the principal amount (owing to the “Sponsor Sharing” feature on Astrea VI).
Issues | Bond Issuer | Ask Price | Years to Maturity/ Next Call | Yield to Maturity/ Next Call (% p.a.) |
Astrea VI | 98.53 | 6.58/ 1.58 | 3.92/ 3.93 | |
Astrea 8 | 102.42 | 14.92/ 4.92 | 4.13/ 3.81 | |
Sources: Bondsupermart, Bloomberg Finance L.P., iFAST Compilations. Data as of 15 August 2024. | ||||
For risk-adverse investors seeking higher yields than SGD sovereign bonds, we like
- VRTVEN 3.300% 28Jul2028 Corp (SGD) which offers above 3.7% for a tenor of nearly four years. Vertex Ventures Holdings is a wholly-owned Temasek subsidiary and mainly invest in early-stage and growth-stage technology. The bond offers a yield pickup over the 2-year SGS (yield: 2.75%) and 5-year SGS (yield: 2.72%) as well as bonds of other Temasek owned/ linked issuers. Additionally, the slightly longer tenor allows investors to lock in higher yields for longer.
Issues | Bond Issuer | Ask Price | Years to Maturity/ Next Call | Yield to Maturity/ Next Call (% p.a.) |
Vertex Venture Holdings | 98.49 | 3.95 | 3.72 | |
Sources: Bondsupermart, Bloomberg Finance L.P., iFAST Compilations. Data as of 15 August 2024. | ||||
For investors with the risk appetite for higher yields, we think these are stable issuers and like the following bonds
- OLAMSP 4.000% 24Feb2026 Corp (SGD), which is attractively priced with close to 1.5 years to maturity, and TMGSP 5.250% 13May2027 Corp (SGD), which offers close to 5% yield, with a longer tenor of close to three years. These names offer good compensation to investors for the additional credit risk (credit spread of around 150 - 220bps (z-spread)).
Issues | Bond Issuer | Ask Price | Years to Maturity/ Next Call | Yield to Maturity/ Next Call (% p.a.) |
Olam International | 99.00 | 1.52 | 4.69 | |
Thomson Medical Group | 100.93 | 2.74 | 4.88 | |
Sources: Bondsupermart, Bloomberg Finance L.P., iFAST Compilations. Data as of 15 August 2024. | ||||
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) hold a position in STRTR 3.750% 29Oct2025 Corp (SGD), STRTR 4.100% 04May2026 Corp (SGD), OUECT 3.950% 02Jun2026 Corp (SGD), GUOLSP 3.290% 26Oct2026 Corp (SGD), BNP 4.750% 15Feb2034 Corp (SGD), CMZB 6.500% 24Apr2034 Corp (SGD), and OLAMSP 4.000% 24Feb2026 Corp (SGD) while the analyst who produced this report hold a NIL position in the abovementioned securities.
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