The Credit Cheat Sheet: What you should do with your bond portfolio given the Middle East conflict.

Synopsis: We summarise the latest happenings in the bond space and highlight some attractive USD and SGD bonds on offer!

Wesley Hoon23 Mar 2026 892 Views

The Credit Cheat Sheet: What you should do with your bond portfolio given the Middle East conflict.

Recently, our global fixed income team shared our take on the fixed income landscape, given the recent outbreak of conflict between the US/Israel and Iran.

Our team is refining its stance on the global fixed income landscape. The US-Israel-Iran conflict appears to be more than a passing storm, with the continued disruption in the Middle East, worsened by intentional strikes on oil infrastructure, which could result in oil prices staying elevated for a longer duration (above US$100 / barrel). This energy shock is shifting the narrative from a “short-lived flash” to a structural risk that opens pathways for global central banks to hike rates to curb rising inflation.

To help investors navigate this period of uncertainty, here are our key updated views as of 23 March 2026:

1. Sticking to investment-grade bonds (IG): strong issuer fundamentals provide a buffer against the current volatile backdrop, offering a yield to worst of 4.8% as of 23 March 2026.

2. Turning neutral to slightly negative on emerging market (EM) debt: higher oil prices have a more outsized impact on Asian countries, given their reliance on imported oil. Spreads have also turned low, relative to historical levels, leaving room for more widening. Hence, EM central banks are under pressure to hike rates.

3. Slightly negative on high-yields (HY): High-yield issuers might come under greater stress if the issuers have to refinance at higher rates. While all-in yields remain decent, spreads also remain tight relative to the historical average.

4. Short to medium tenor: we like shorter-term bonds (3-5 years) for both government (US and SG), and IG, as they provide decent yields without having to take on significant duration risks. Meanwhile, we remain selectively constructive on medium tenor issues (5-8 years) – the yield curve has steepened recently, meaning that investors can earn decent yields on solid issuers if they are willing to ride out rate-driven volatility.

Up to Date with Rates

• The Federal Reserve left rates unchanged at 3.50% to 3.75%. Powell noted economic growth remained solid and that job gains have remained low, although the unemployment rate has been little changed in recent months, while still cautioning that inflation remains somewhat elevated. Looking ahead, Powell cautioned that uncertainty has increased materially, given higher oil energy prices (due to the Middle East conflict). Looking ahead, the Fed expects inflation to pick up, which has resulted in a more hawkish interest rate path where rate cuts remain unlikely in the next few meetings=. Check out our detailed coverage of the latest Fed meeting here: No more rate cuts in 2026? Rate hike in 2027? Read on for our March Fed meeting recap.

• In Europe, the ECB kept its three main policy rates unchanged for the fifth consecutive meeting. While the Eurozone’s underlying economic fundamentals have remained positive, ECB officials warned that a prolonged conflict in the Middle East will cause upward pressure on rates, given Europe’s structural vulnerability to the spike in energy prices. As of 20 March 2026, market participants are pricing in two full 25bps hikes by June 2026.

• In the UK, the BOE voted unanimously to hold its current bank rate at 3.75%. The BOE governor, Andrew Bailey, warned that inflation is likely to pick up given the Middle East conflict, and that “the path to 2% inflation is now much longer and steeper”. Consequently, the central bank has officially removed its guidance that rates were likely to be reduced further. Market participants are pricing in 50-70 bps of rate hikes, as of 23 March 2026.

• In Japan, the BOJ kept rates unchanged at 0.75% at the March 18-19 meeting. The combination of a weaker Yen and high oil prices represents a double-edged sword that could force a “stagflationary” environment in Japan. Governor Ueda vows to raise rates if imported inflation, from higher oil prices, remains sustained.

• For the period from 28 January 2026 to 20 March 2026, the 2-year Singapore Overnight Rate Average-Overnight Index Swap (“SORA-OIS”) increased by 62 basis points to 1.45%, the 5-year SORA-OIS increased by 57 basis points to 1.82%, and the 10-year SORA-OIS increased by 22 bps to 2.12%. Overall, this continues the pickup of yields for the medium tenors, in line with major non-US rates.

• The 5-year Singapore Government Securities increased by 23 bps to 1.86%, while the 10-year Singapore Government Securities increased by 38 bps to 2.17%.

• Cut-off yields slipped slightly in the latest 12 March 2026 6-month T-bill auction, which saw rates moderate slightly to 1.37%, due to a possible flight-to-safety. In the recent 6-month T-bill auctions, the bid-to-cover ratio was at a low, consistently trending downwards, hovering around the 2.00x level over the past few auctions.

SGD Bond Investment Ideas

BPCEGP 5.000% 08Mar2034 Corp (SGD)

BPCEGP 4.600% 21Jan2035 Corp (SGD)

For the full year ending 31 December 2025 (FY25), BPCE, France’s third-largest banking group, continues to maintain a stable credit profile. The FY2025 results (ended 31 December 2025) highlighted that profitability remains firm with net banking income rising 10% (YoY) to a record €25.7b. BPCE continues to report strong capital buffers with the CET1 ratio at 16.3% (above the 10.59% regulatory requirement), while asset quality remains stable with an NPL ratio of 2.7%. Liquidity remains healthy with an LCR of 138% at the end of December 2025.

We like BPCE’s two outstanding tier 2 issues with yields around the 2.9+-3.1+%, at an estimated 3-4 years to the next call. These issues stand out as being among the highest-yielding investment-grade bonds in the SGD markets. We also believe these tier 2 bonds provide decent yield pickups over many of its peers.

WHURSP 4.800% 04Nov2030 Corp (SGD)

For the full year ending 31 December 2025 (FY25), Wee Hur, an investment holding group, reported increasing profitability and a record order book. Looking forward, we expect the accommodations segment, anchored by the group’s workers’ dormitories, to continue serving as the group’s income anchor. Record order book of S$673m as at the end of December 2025, also provides good multi-year revenue visibility for the group through 2029. While operating cash flow has improved meaningfully, up 121% YoY, we still caution that free cash flow is likely to thin moving forward as the group reinvests in its business. Overall, these factors support Wee Hur’s solid credit profile, underpinned by a low net gearing ratio of 12% and a solid interest coverage ratio of 8.4x.

We continue to favour Wee Hur’s outstanding 2030 bonds as these issues offer a solid yield to maturity of 4.5+% for an intermediate time frame (4.6 years), which provides decent yield pickup compared to peers. Investors looking for higher yields from an issuer that is displaying an improvement in credit profile can consider these Wee Hur bonds.

QNMSP 3.950% 10Jul2028 Corp (SGD)

For the full year ending 31 December 2025 (FY25), Q&M Dental continues to maintain a stable credit profile. The FY25 results highlighted an increase in profitability from the group’s core dental operations, up 16% YoY to S$30.4m. We are also encouraged by the swing to profitability displayed by the group’s China business (Aoxin), which supports the group’s heavy M&A strategy. Looking forward, management is actively implementing initiatives to strengthen the group’s margins, while also looking at expanding its footprint in the upcoming Johor-Singapore special economic zone. Q&M’s decent credit profile continues to improve, as seen by a moderation of its debt / EBITDA to 0.7x for FY25 (FY24:1.03x). Similarly, interest coverage remains resilient at 3.8x, comfortably above the bank covenant requirement of 1.75x.

We continue to see value in Q&M Dental’s 2028 outstanding issues. These bonds provide a yield to maturity of 3.38% with 2.3 years to maturity, which we view as attractive given the issuer’s solid credit profile compared to higher leveraged peers. Investors looking for a decent income, backed by a solid credit profile, can consider these Q&M bonds.

AAREIT 4.100% Perpetual Corp (SGD)

AAREIT 4.250% Perpetual Corp (SGD)

In its latest 9 months ending 31 December 2025 (9M2026), AAREIT, a logistics-focused S-REIT, disclosed a resilient performance. The 9M26 business update highlighted decent rental reversion (8% YoY), marked by solid contributions from its “logistics and warehouse” and “Hi-Tech” segments. AAREIT’s aggregate leverage picked up slightly, coming in at 36.6% (compared to 33.7% in 9M2025), while interest coverage improved from 2.4x to 2.6x. We note that both metrics are comfortably within MAS regulations (50% for leverage and 1.5x for interest coverage), while also highlighting the REIT’s recent ability to lower its finance costs (4.1% now compared to 4.4% in 9M25). Overall, we remain highly comfortable with AAREIT’s stable credit profile.

We think AAREIT’s two recent perpetuals, yielding around the 3.9+-4.1+%, at an estimated 5 years to call present decent value. These issues stand out as being among the highest-yielding recent perpetuals in the SGD markets, providing decent yield pickups compared to peers, underpinned by a decent credit issuer profile. Notwithstanding perpetual-related risks, including non-call risks and smaller initial margin spreads for these issues, investors may consider these issuances.

USD Bond Investment Ideas

PETBRA 5.125% 10Sep2030 Corp (USD)
PETBRA 5.600% 03Jan2031 Corp (USD)
PETBRA 6.500% 03Jul2033 Corp (USD)

Petrobras, the Brazilian state-controlled, integrated company, is a prime beneficiary of higher oil prices because of the Middle East conflict. For the FY2025 results (ended 31 December 2025), despite softer global oil prices experienced in 2025, the company reported resilient financials. Adjusted EBITDA declined moderately to US$43.8b, where a pickup in production (+11% YoY to 2.99 million barrels of oil equivalents), helped cushion softer oil prices. Similarly, operating cash flow held steady at US$36b (-5% YoY). Looking ahead, a period of elevated oil prices would benefit the company’s operations and cash-generating ability. Petrobras’ credit profile remains broadly stable, with a Net Debt to EBITDA of 1.4x, an adjusted EBITDA / interest coverage of roughly 15.6x.

While Petrobras has multiple outstanding bonds, we favour the short to medium tenor ones: PETBRA 5.125% 10Sep2030 Corp (USD), PETBRA 5.600% 03Jan2031 Corp (USD), and PETBRA 6.500% 03Jul2033 Corp (USD). With call dates ranging from 4.3 – 7+ years, these bonds offer a yield to worst around the 5.4+% mark, representing compelling yield pickup over USD IG corporate bonds and other global oil majors (Shell, Exxon, Chevron, BP). Investors seeking higher income, with an issuer that has a solid credit profile and stands to benefit from the prolonged geopolitical conflict, can consider these Petrobras issues.

XP 6.750% 02Jul2029 Corp (USD)

XP is a leading brokerage in Brazil, which is posing a serious disruptive threat to the region’s traditional financial operators (banks). For the FY2025 results (ended 31 December 2025), the company saw decent top-line growth, with net revenue rising 8% to R$18.4b. This growth was led by strong contributions from the “Retail, Corporate & Issuer Services” (C&IS) segment, which grew revenue 32% YoY on the back of healthy activity in the debt markets. Encouragingly, XP managed to scale this top-line growth profitably, with net margin inching up to 28% (FY24:26%). The company’s credit metrics remain stable, with a loan-loss rate on its loans/cards portfolio at 1.3%. Funding and liquidity risks appear limited, with the company operating in a net cash position, alongside decent capital buffers: a CET1 ratio of 17.3% and a total capital ratio of 20.4%, which likely gives the company healthy breathing space over regulatory requirements.

We like XP’s 6.750% 02Jul2029 Corp (USD) bonds as these issues offer a yield to worst of 5.7% with an estimated tenor of roughly 3+ years. Relative to traditional peers such as Itaú Unibanco and Banco Bradesco, which are higher rated, we find decent yield pickup for these XP bonds. For investors seeking higher income from a decent credit issuer, we highlight these issues for consideration.

Hot New Issues:

Issue	Issuer	Issuance Date	New Issue View
HPLSP 4.380% Perpetual Corp (SGD)	Hotel Properties Limited	25 Mar 2026	New Issue: Hotel Properties Limited 4.60% (IPG) SGD Perp – Decent yield in today’s environment
CAPITA 2.180% 10Mar2031 Corp (SGD)	CMT MTN Pte Ltd	02 Mar 2026	CICT announces 5y SGD senior green unsecured bonds at an IPG of 2.40%
AAREIT 4.250% Perpetual Corp (SGD)	AIMS APAC REIT	26 Feb 2026	New Issue: 4.45% yield (IPG) offered by SGX-listed AIMS APAC REIT
MINTSP 3.250% Perpetual Corp (SGD)	Mapletree Industrial Trust Treasury Co Pte Ltd	25 Feb 2026	New Issue: Mapletree Industrial Trust launches NC5 SGD perpetuals at IPG of 3.50%
CDREIT 4.000% Perpetual Corp (SGD)	CDL Hospitality Trusts	10 Feb 2026	New Issue: 4.25% yield (IPG) offered by SGX-listed hospitality REIT

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds positions in AAREIT 4.100% Perpetual Corp (SGD) and QNMSP 3.950% 10Jul2028 Corp (SGD). The analyst who produced this report holds NIL positions in the abovementioned securities.

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The Credit Cheat Sheet: What you should do with your bond portfolio given the Middle East conflict.

Up to Date with Rates

SGD Bond Investment Ideas

BPCEGP 5.000% 08Mar2034 Corp (SGD)

BPCEGP 4.600% 21Jan2035 Corp (SGD)

WHURSP 4.800% 04Nov2030 Corp (SGD)

QNMSP 3.950% 10Jul2028 Corp (SGD)

AAREIT 4.100% Perpetual Corp (SGD)

AAREIT 4.250% Perpetual Corp (SGD)

USD Bond Investment Ideas

PETBRA 5.125% 10Sep2030 Corp (USD)
PETBRA 5.600% 03Jan2031 Corp (USD)
PETBRA 6.500% 03Jul2033 Corp (USD)

XP 6.750% 02Jul2029 Corp (USD)

Hot New Issues:

In this article

AAREIT 4.100% Perpetual Corp (SGD)

AAREIT 4.250% Perpetual Corp (SGD)

BPCEGP 5.000% 08Mar2034 Corp (SGD)

BPCEGP 4.600% 21Jan2035 Corp (SGD)

PETBRA 5.600% 03Jan2031 Corp (USD)

PETBRA 6.500% 03Jul2033 Corp (USD)

PETBRA 5.125% 10Sep2030 Corp (USD)

XP 6.750% 02Jul2029 Corp (USD)

WHURSP 4.800% 04Nov2030 Corp (SGD)

QNMSP 3.950% 10Jul2028 Corp (SGD)

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