While government bonds have underperformed on the year, we cannot say the same for the SGD corporate market.
Corporate bond yields have caught up with government yields in a significant way, with government bond yields up massively year to date, led by the short end SIBOR rates which have gapped higher against the rest of the developed world that has been focused on cutting.
So we see government yields up 0.06 to 0.46% higher as swap rates are up 0.34-0.77% and SIBOR fixings at a 6 year record high. Government bonds, too, have gained in credit worthiness in that sense as they have outperformed the swap curve
Corporate bonds have mostly fallen in price with just over 20 bonds (out of over 70) that are above 100 but the rest have mostly kept close to their issue prices which indicates that their credit spreads have compressed as buyers remain absolute yield driven. Another contributing factor that buyers have to thank for is the illiquidity of the marketplace which has left secondary trading quite limited in the past 3 months. Less trading and wider prices make panic selling impossible which is good for keeping prices at higher indicative levels and that would manage to keep the markets calm.
Let us look at the list of top performing credits in Singapore for 2015 bond issues. For that I used the bond issuance spread against the prevailing interest rates at the time of issue and compare that to their current market price and credit spread.
The top 5 bonds managed over 1% gains in credit against the swap curve and only 8 bonds have deteriorated in credit terms (sorry for the double mention of Golden Agri and Gallant Venture). Out of the 8 bonds that look worse off, we have 2 out of AAA rated supranational IBRD and the worst performing bond, Baa3 rated China Jingye only widened by manageable 0.34%.
For the lucky people who had bought into the bonds that are holding well above par, or even those which have performed well credit-wise, perhaps it is time to wonder if you should be switching into a better quality asset given that government bonds have sold off substantially, bearing in mind that credit spreads can widen as well as tighten and we should be cognisant that should rates fall, the corporate papers may not rally as much as they have not sold off this year.
Good luck !