This performance supports our thoughts in the SGD Credit Outlook 1H2025, which suggests that SGD Credit will remain relevant and a competitive alternative to Asiadollar
Credit in 2025 amid potentially higher volatility ahead due to trade policies and geopolitical uncertainties.
Indirect impact was seen, but the SGD credit market was not entirely immune to tariff impacts in 1H2025, with $12.8 billion issued as of June 25. This was down around 22% y-o-y compared to issuances in 1H2024 (excluding the Singapore government’s $2.5 billion SIGB 3.25% ‘54s from May 2024).
While 2024 had a relatively high base, with full-year issuance second only to the $31 billion recorded in 2012, the issuance trends by month in 1H2025 show clearly how volatility related to Liberation Day in early April intimidated issuers and investors alike. Following a relatively solid start to 2025 with $8.2 billion issued across January to March ($8.8 billion issued during the same period in 2024), April primary market activity in the SGD credit market grounded to a halt with only around $213 million priced, the lowest monthly amount since 2019 and likely the lowest on record. In contrast, March saw a surge in activity with $3.96 billion in issuance volume as issuers rushed to the market before the tariff announcements.
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Quality as important as quantity for primary issuance. As much as the elevated volume in March may have been a result of issuance being brought forward, of additional note was the breadth of issuers highlighted by (1) frequent issuer HSBC Holdings that issued a $800 million Additional Tier 1 and (2) Equinix Asia Financing Corp that priced its inaugural $500 million 5Y green senior unsecured bond at 3.5% that is guaranteed by large data centre REIT, Equinix Inc.
In between these issuers were several repeat issuers in the SGD credit market (including City Developments, CapitaLand Integrated Commercial Trust, Suntec REIT) and several less frequent SGD issuers, including Swiss RE Subordinated Finance with its $450 million Tier 2 bond guaranteed by Swiss RE AG, Optus Finance with its $250 million seven-year fixed bond (guaranteed by Singtel Optus and certain of its subsidiaries) and CapitaLand India Trust with its $200 million five-year note.
This trend resumed in May and June, with supply returning to the SGD Credit market as the 90-day tariff pause announcement provided some respite for the market while the higher activity also reflected spread widening from the tights, which made SGD Credit somewhat attractive for both issuers (given still relatively tight spreads) and investors (given still decent all in yields).
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While issuances were dominated by financial services (including financial institutions, insurance companies and other financial companies), there was also a decent mix of issuances from property companies, including (1) the SGD Credit Market’s first perpetual in two months with CapitaLand Ascott Real Estate Investment Trust issuing a $260 million PerpNC5.8 subordinated perpetual, (2) European focused IREIT Global’s inaugural SGD issue pricing $85 million in green senior unsecured notes, and (3) Perennial Holding’s $50 million retap of its PREHSP 5.75% ‘28s for refinancing, working capital, investment and capital expenditure for its healthcare projects.
In our view, what March, May and June highlight is that, notwithstanding continued global uncertainty over tariffs imposed by the US administration under President Trump in April, investors continued to seek out new issuances in SGD, albeit somewhat selectively and disciplined about the prices at which they are willing to invest.
2H2025 outlook – staying neutral
While we started 1H2025 with some uncertainty about the extent of policy shifts under President Trump 2.0, few market watchers would have been prepared for the magnitude and frequency of policy shifts, as well as the intensity of market swings resulting from the associated volatility. This was reflected in the revisions to our views for the SGD credit market throughout 1H2025, which were directionally in line with our overall expectations but differed in their extent. As we wrote in late 2024, “Singapore’s stability contrasts with the fluctuations seen in major global economies. Consequently, we expect SGD credit markets to continue to act as a relatively safe harbour in times of heightened geopolitical stress.”
This, along with the limited direct impact of Trump tariffs, was the reason we turned “overweight” on the SGD credit market on April 9 from “neutral” while remaining vigilant to possible risks of stagflation. Credit spreads widened due to heightened volatility and rate compression throughout the rest of April, but the SGD credit market continued to post positive returns in May and June as supply returned to the market. With the SGD credit market already having run up somewhat, we revised our call on the SGD credit market to “neutral” from “overweight” at the start of June.
However, we are ending June and entering 2H2025 with continued uncertainties. With this in mind, we continue to like the SGD credit market as it is expected to provide total positive returns. That said, we advise investors to be increasingly selective. While credit as an asset class should remain in demand, we expect this demand to be somewhat focused on high-grade issuers, with the issuance and market performance outside of this space being more tepid.
1. We are neutral on very short (<1Y) and short tenor (1–3Y) bullets while preferring higher-yielding bonds in the high-grade bonds space in the belly (>3Y to 9Y) and longer tenors (up to 20Y). Considering credit selection, longer-duration bonds can lock in yields and mitigate reinvestment risks while interest rates are at current levels.
2. No preference for SGD crossover credits over high grade. While we still expect default rates to remain low, with liquidity risks among crossover issuers manageable, we conservatively anticipate that heightened risk aversion will likely drive demand into high-grade assets. However, retracements in risk appetite could be positive for select crossover credits.
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3. Selectively overweight perpetuals with higher yields and resets. Although the operating environment remains fluid, we continue to be “overweight” in non-financial corporate perpetuals with wide reset spreads, while staying “neutral/underweight” in those with tight reset spreads and an unlikely likelihood of call. Non-call risks for the majority of perpetuals with first-call dates for the remainder of 2025 are expected to remain low. We also expect the bulk of the perpetuals with first call dates in 2026 to be called, although with a lower confidence level for the probability of call for certain REIT perpetuals.
4. Similarly, we remain selectively “overweight” bank capital instruments, in particular those with higher yields and wide reset spreads. This includes both Tier 2s and Additional Tier 1s. Financial institutions should remain resilient and benefit from a flight to quality, as has been the case in recent episodes of market volatility, although most are expected to report solid earnings results for the remainder of 2025. That said, credit dispersion is rising for financial institutions and we remain mindful of the impact on Additional Tier 1s from pullbacks in sentiment during adverse episodic events that occur as a result of heightened financial market volatility. The recent spread widening, however, has created some buffer against volatility.
5. We remain “underweight” true high yield. However, true high-yield issuances are limited in SGD credit and idiosyncratic factors will be a bigger driver.
The four authors are credit research analysts with OCBC’s global markets research team
