The Business Times

Bond yields up, but 'still some way off' from Minsky moment, says GIC's top exec

Published Tue, Mar 9, 2021 · 05:50 PM

MARKETS are pricing in a strong recovery on the back of vaccine optimism and stimulus, with expectations showing up in bond yields and break-even inflation rates which have caused concerns on overheating, noted GIC’s top executive at a virtual conference on Tuesday.

But even as concerns on overheating will continue in the near future, the situation is “not quite getting to” the Minsky moment – that is “still some way off”, said CEO Lim Chow Kiat.

The Minsky moment refers to a sudden, major collapse of asset values that marks the end of a cycle in credit markets or business activity.

He was speaking at the IMAS-Bloomberg Investment Conference on trends that will impact the future of capital for investors.

Bond yields have spiked over the past few weeks on key drivers such as projections of a strong V-shaped economic rebound, as well as the vaccine rollout, large stimulus from economies such as the US, noted Mr Lim.

“I started my investment career in bonds, so I’m particularly sensitive to inflation and things which erode the value of bonds,” he told the audience. “So, rightly, I think the bond investors are concerned with such a large amount of stimulus, whether this could cause an overheating problem.


Start and end each day with the latest news stories and analyses delivered straight to your inbox.


“On the real economy front, but also on the supply front, you are staring at a lot of supply of bonds. Absorbing that might require a higher level of yields.”

He pointed out that historically, some issues that could crop up from an overheating economy include consumer price index inflation, asset inflation or excessive credit growth, but not all these are showing danger signs.

Credit growth, for example, is not seeing a spike, he said. There is a lot of debate at this point on the severity of the issue as bond yields are “not that high to cause a big problem for valuations” of assets at this level, but it would be a concern if yields move further upward, noted Mr Lim.

He believes that there will be continued headwinds on this front, with some street projections pinning the 10-year Treasury yield at 2 per cent or higher. It started the year around 0.9 per cent and is now hovering around 1.5-1.6 per cent.

“The overheating issue will be a market issue for the near term at least, and maybe for the rest of this year,” said Mr Lim.

As the US takes the lead in terms of the amount of stimulus, it will be the biggest macro driver at least for the next 12 months, he added.

On the volatility seen in the bond market of late, Mr Lim shrugged it off as “par for the course” in a liquidity-driven market. “The sentiment will be a main driver of how people decide to buy or sell, so I would assume that that will be the norm for a while,” he said.

Alongside flush liquidity, one hot topic that he spoke on was on Special Purpose Acquisition Companies (SPACs) – a phenomenon that has seen a rise in popularity in a cash-flush world. “If the IPO (initial public offering) market is actually working fine in Asia, maybe the need for a lot of these SPACs is not as great,” said Mr Lim. “But if liquidity continues to be flush, it wouldn't be a surprise that you can see a few more SPACs being set up to try and channel money into the hottest investment ideas.”

He also listed environmental, social, governmental (ESG) investments as a key theme for investors. “Last year was when doing good and doing well converged,” he said.

GIC’s investment focus will be on the transition aspect of it, or “from brown to green”, he said. This is a process that will involve trillions of dollars in capex, new spending and changes to the business model, said Mr Lim, noting that it could take 10 years or more.

As companies transition to become more sustainable or green, he believes that GIC could “find quite a number of these opportunities” to invest in, he said.

“In doing so, you want to pay attention to regulations, you want to pay attention to technology,” he said. “I think technology is going to come to the rescue, for sustainability as well.”

GIC is also looking “very closely” at renewable technologies, both in terms of hardware and software.

With capital access and a good fit, GIC is looking at corporate transitions to sustainability as “the place we want to go”, added Mr Lim.

ESG investing was a key focus at the conference, on growing recognition of climate change and sustainability as global priorities, and changing investor preferences.

In his keynote address, Ravi Menon, managing director of the Monetary Authority of Singapore (MAS) kicked things off by declaring that the “future of capital is green”.

One strategy that Singapore is zooming in on is to broaden green financing solutions and markets.

He announced that MAS will soon be placing US$2 billion of its funds with undisclosed asset managers committed to deepen green finance activities. This programme was first announced a year ago.

The selected asset managers will designate Singapore as their sustainability hub in the Asia-Pacific, where they will lead Asia-focused sustainability research and spearhead ESG engagements in the region, said Mr Menon.

Many also have plans for designing training curriculum in sustainable finance to help build relevant skills among the broader investor community, he added.

He also announced new developments in MAS’ plans to anchor relevant centres of excellence, think-tanks and research networks in Singapore.

Moody’s Corporation is building a suite of ESG resources out of Singapore to spearhead its sustainable finance agenda in Asia Pacific, including a centre for investor outreach, engagement training and an innovation lab and tech accelerator to develop ESG solutions and tools in partnership with local fintechs.

The Sustainable Finance Institute Asia, an independent research and capacity building institute, has also established its headquarters in Singapore, he added.


  • Rising Treasury yields, inflation expectations fuel safe haven pull-out
  • US Treasury yields stabilise, but investors still wary


BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to

Banking & Finance


Get the latest coverage and full access to all BT premium content.


Browse corporate subscription here