$UNITED SGD "A" (SGD) INC(SG9999010805)$
As the US–Israeli war on Iran enters its third week, volatility across global bond markets has intensified. Since the outbreak of hostilities on 28 February 2026, the two‑year US Treasury yield has climbed from 3.4 percent to 3.7 percent, while the 10‑year yield has risen from 4.0 percent to nearly 4.3 percent [1]. These moves reflect growing concerns that higher energy prices could fuel renewed inflation and lead major central banks to adopt a more hawkish policy stance. As a result, global bond prices have declined, and wider market sentiment has turned more cautious.
Impact on Asia credit markets
Credit markets in Asia have also been impacted. Asia relies heavily on Middle Eastern energy, sourcing about 60 percent of its oil from the Gulf. This makes it vulnerable to any prolonged disruption in supply. With oil prices now hovering around US$100 per barrel, investors have grown concerned that higher energy costs could erode corporate earnings and dampen the region’s growth outlook. This had led to a widening in JACI (JP Morgan Asia Credit Index) Investment Grade credit spreads and a 1.29 percent decline in the JACI Investment Grade Index since the conflict began [2].
Sector impact
In the near term, sectors with significant energy exposure or reliance on global supply chains are likely to come under the most pressure. Aviation and tourism, for example, may be affected as higher fuel costs coincide with operational disruptions along Middle Eastern flight routes. In contrast, sectors such as financials and healthcare are generally less affected by fluctuations in energy prices.
Overall, we expect higher‑quality bond issuers to remain relatively more resilient, supported by stronger fundamentals, diversified business profiles and robust balance sheets.
Portfolio performance
Amid the rise in US Treasury yields and wider credit spreads in recent weeks, the United SGD Fund (the “Fund”) has declined 0.29 percent in the month to date. Even so, it has held up better than its Morningstar peer group, which fell by an average of 0.45 percent over the same period.
United SGD Fund performance (as of 13 March 2026)
Source: Morningstar, as of 13 March 2026. Past performance is not necessarily indicative of future performance. Fund performance is based on United SGD Fund Class A SGD Acc, in SGD terms, on a NAV basis, with dividends and distributions reinvested, if any. Fund performance is net of fees. Morningstar peer group refers to Morningstar SGD Bond Fund category.
This relative resilience stems from the Fund’s conservative positioning. Its low duration of 1.58 years [3]
helped cushion the portfolio from the sharp rise in yields, given that shorter duration bonds are typically less sensitive to interest rate changes as compared to longer-duration bonds.
In addition, the portfolio’s emphasis on high‑quality investment‑grade bonds and exposure to resilient sectors helped mitigate the impact of spread widening. The Fund is well diversified across sectors such as financials, real estate, consumer discretionary, industrials and utilities, areas where companies generally have stronger balance sheets and more stable cashflows. This emphasis on quality provided an additional buffer amid the pullback in Asia credit markets.
United SGD Fund sector allocation
Source: Morningstar, as of 28 Feb 2026
A strong and steady track record
The Fund’s longer-term record further reinforces its resilience. Since its inception in 1998, it has experienced only two negative calendar years and has had no defaults.
Furthermore, the Fund continues to exhibit significantly lower volatility than its peers. Over the past three years, the Fund’s standard deviation stands at just 0.93 percent, compared with the Morningstar peer group average of 2.40 percent over the same period [4]. This lower risk profile reflects the Fund’s consistent emphasis on quality investment grade bonds, short duration and broad diversification – key attributes that anchor its stability across market cycles.
Current positioning
The Fund remains focused on holding high‑quality bonds with expected maturities of up to three years, in line with its short‑duration approach. We continue to pick issuers with strong balance sheets and stable, predictable cash flows, supported by careful sector selection to manage risk effectively.
Periods of market volatility can create buying opportunities, and we will selectively add high‑quality names when valuations become more compelling.
Looking ahead
While uncertainty is likely to persist in the near term, corporate balance sheets across Asia generally remain healthy, with manageable debt levels and adequate liquidity. Market technicals are also supportive, backed by steady demand for high‑quality Asian credits and a manageable pipeline of new issuance. These factors should help underpin the asset class and support a recovery once sentiment improves.
Oil prices will be an important driver to watch. A quick resolution of the conflict could limit the inflation impact, but a prolonged escalation may keep energy prices elevated. In that environment, we will be closely monitoring how higher oil costs affect company margins, especially for sectors with greater energy exposure.
[1] Source: Bloomberg, as of 13 March 2026
[2] Source: Bloomberg, as of 13 March 2026
[3] Source: Morningstar, UOBAM, as of 28 Feb 2026
[4] Source: Morningstar, as of 28 Feb 2026
If you are interested in investment opportunities related to the theme covered in this article, here is a UOB Asset Management Fund to consider:
$UNITED SGD "A" (SGD) INC(SG9999010805)$
You may wish to seek advice from a financial adviser before making a commitment to invest in the above fund, and in the event that you choose not to do so, you should consider carefully whether the fund is suitable for you.
Please refer to uobam.com.sg/awards for the latest list of UOBAM awards.
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This document is for general information only. It does not constitute an offer or solicitation to deal in units in the Fund (“Units”) or investment advice or recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. The information is based on certain assumptions, information, and conditions available as at the date of this document and may be subject to change at any time without notice. No representation or promise as to the performance of the Fund or the return on your investment is made. Past performance of the Fund or UOB Asset Management Ltd (“UOBAM”) and any past performance, prediction, projection or forecast of the economic trends or securities market are not necessarily indicative of the future or likely performance of the Fund or UOBAM. The value of Units and the income from them, if any, may fall as well as rise, and is likely to have high volatility due to the investment policies and/or portfolio management techniques employed by the Fund. Investments in Units involve risks, including the possible loss of the principal amount invested, and are not obligations of, deposits in, or guaranteed or insured by United Overseas Bank Limited (“UOB”), UOBAM, or any of their subsidiary, associate, or affiliate (“UOB Group”) or distributors of the Fund. The Fund may use or invest in financial derivative instruments, and you should be aware of the risks associated with investments in financial derivative instruments which are described in the Fund’s prospectus. The Fund may invest in capital instruments issued by Singapore incorporated financial institutions that are classified as Additional Tier 1 ("AT1") or Tier 2 ("T2") under MAS Notice 637 (or equivalent Regulations or Notices applicable to issuers of such instruments in Singapore, collectively, "risk based capital adequacy requirements"), which defines the regulatory requirements, eligibility criteria, and loss absorbency features of such instruments. AT1 and T2 instruments carry higher risks, including potential write down at the point of non-viability, as specified under the respective risk-based capital adequacy requirements. The UOB Group may have interests in the Units and may also perform or seek to perform brokering and other investment or securities-related services for the Fund. Investors should read the Fund’s prospectus, which is available and may be obtained from UOBAM or any of its appointed agents or distributors, before investing. You may wish to seek advice from a financial adviser before making a commitment to invest in any Units, and in the event that you choose not to do so, you should consider carefully whether the Fund is suitable for you. Applications for Units must be made on the application forms accompanying the Fund’s prospectus.
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