SGD bonds continue to rally

THE Singapore Fixed Income (SFI) index rose to an all time high last week as local bonds continued to rally with expectations of interest rate hikes pushed further away.

The SFI reached an all-time high of 122.25 on Thursday before closing the week at 122.20, 0.78 per cent up from the previous week, said the Singapore Exchange on Monday.

Year-to-date, the SFI currently outperforms the Straits Times Index by 12.17 per cent (2.23 per cent vs -9.94 per cent), it said.

The SFI increase was largely supported by Singapore Government Securities (SGS), measured by a 0.96 per cent increase in the SFI Government Bond Index. The SFI has now risen for five consecutive weeks and is up 2.23 per cent year-to-date, it said.

Corporate bonds also gained, measured by a 0.49 per cent increase in the SFI Corporate Bond Index. This is also the index's fifth consecutive weekly gain, and the index's largest since the week of March 23, 2015 (+0.73 per cent).

Interest yield for the SFI has declined 12 basis points in the last seven weeks, from 3.015 per cent on August 28.

Long dated bonds continue to perform.

Ascendas Reit 4.75 per cent perpetual bonds sold early this month has risen to 100.222, up 0.103 on Monday. DBS 4.7 per cent perps too rose on Monday, up 0.018 to 102.535.

Fixed income bankers say SGD bonds are in play because interest rate hikes have receded to the background for now.

Speaking last Friday, Todd Schubert, Bank of Singapore head of fixed income research, said the lacklustre US jobs report earlier this month and the subsequent downward revision by the International Monetary Fund in growth were game changers for fixed income.

"With lower prospects for growth, investors pushed back expectations of a rate hike from December to March or April next year. This 'lower for longer' feeling for interest rates has driven the strong performance in fixed income globally, including that of the SGD fixed income market."