- The potential introduction of rate increases by Federal Reserve and contrary actions by the European Central Bank continued to add uncertainty to the global interest rate outlook.
- At home, the SGD denominated bond market is fast growing with Singapore’s economic fundamentals providing financial foundations for the various bonds and bond funds ETFs listed on SGX.
- The Singapore Fixed Income Index (SFI) covers over 80% of the Singapore Dollar denominated plain vanilla bullet bond market, providing a deeper history than any other independent Singapore corporate & government bond index.
Fixed income markets serve specific economic, investment and policy purposes. The latter has been clearly exemplified with global central banks introducing monetary stimulus activities, such as the U.S. Federal Reserve’s Quantitative Easing (QE) program. Such actions have involved fixed buying of longer term treasuries to contain the pressure of rising interest rates. Hence the policy has been supportive of financing (borrowing) rates and less accommodative to lenders who seek higher long term bond yields.
The market continues to look beyond QE and toward the potential introduction of rate increases by the Federal Reserve, meanwhile the European Central Bank (ECB) in September 2014 introduced further cuts to its benchmark interest rates (down to 0.05%). The ECB has also pledged to buy hundreds of billions of euros in private sector bonds.
Against the backdrop of continued geopolitical conflict in Eastern Europe and the series of events in Syria and Iraq, it is a challenge to anticipate exactly where interest rates are headed over the new few quarters. Hence the market remains vibrant and bond structures continue to evolve with developments.
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