Singapore dollar-denominated corporate bonds are still more attractive relative to Singapore government securities, according to Citywire AA-rated Danny Tan.
Tan, who manages the Eastspring IUT-Singapore Select Bond A fund, said the fund is overweight on property-related corporate bonds, mainly due to the fact that they are the main issuers this year.
The real estate investment trusts sector continues to drive the Singapore dollar bonds issuance.
Despite a limited pool of Singapore dollar-denominated corporate bonds to choose from, Tan said he will choose lower yielding assets rather than taking credit risks for the portfolio if he doesn’t think the existing corporate bonds are good enough to invest in.
‘We have to look for bonds that are actually quite defensive in nature,’ he told Citywire Asia.
Although the yields from Singapore corporate bonds are more attractive than Singapore government bonds, Tan cautioned that investing in the wrong corporate bond could also lead to lower yield particularly when one need to sell off.
Tan said Singapore corporate bonds could yield up to about 3.5%, higher than Singapore government bond, which could yield about 2.1%.
The Select Bond fund aims to maximise total returns over time by investing primarily in Singapore-dollar denominated debt securities and foreign currency debt securities which will be hedged back into Singapore Dollars.
Meanwhile, Tan said the fund is open to investing in the upcoming Singapore $24 billion infrastructure bond issuance to increase the fund’s credit diversity.
As the fund is open ended fund, it could buy into the infrastructure bonds if the yield makes sense, Tan said, noting that the duration for infrastructure bonds typically could go up to 30 years.
In anticipation of rates hike, the fund has also shortened the durations of the bonds it invest in.