US Treausry 10-year yield
In my opinion, we are bound to see a shift in the following weeks and months in the bond market. The big question will be: to which direction? If as many expected, we see lower rates (possibly towards negative rates territory) in the U.S. Treasuries, the bond ETFs will gain more value given the inverse relationship. This is also in line with the deflationary expectations of the investors as a result of COVID-19 and economic slowdown. However, if somehow we see more inflationary pressures and the yields jump suddenly, this would bring a big selloff to the bond market and thus decline in the bond ETFs. Even though Asia portfolio only holds Singapore government bond ETFs, the direction of the US Treasuries will be decisive for all the global yields around the world.
Given the limited risk-reward ratio in the government bond market now, I welcome the Q3 rebalancing and reduction of exposure in digiPortfolio.