To The Moon

$UNITED SGD "A" (SGD) INC(SG9999010805)$

Manager Comments

Rise in US Treasury prices

The fund benefited from a lift in Treasury prices and fall in yields last month, driven by dovish signals from the Federal Reserve and softer economic data. Inflation also stayed benign with May’s Personal Consumption Expenditure (PCE) Price Index showing only a small MoM gain. Easing Middle East tensions and falling oil prices further helped keep inflationary pressures steady. Additionally, the Fed’s proposal to reform the supplementary leverage ratio for large banks boosted liquidity and the demand for US Treasuries. As a result, 2-year and 10-year yields fell 18bps and 17bps respectively, closing at 3.72 percent and 4.23 percent1.

Stable credit spreads

Asian credit markets also remained resilient despite geopolitical risks and the expiry of President Trump's 90-day tariff pause on 9 July. Investors continued to favour higher-quality issuers and shorter-term bonds. The JP Morgan Asia Credit Index (JACI) Investment Grade credit spread widened by just 2 basis points to 120bps following new issuance activity2. Looking ahead, Asian credits are expected to trade sideways in the near term as investors navigate US tariff developments, geopolitical risks, and a data-dependent Fed. A deterioration in global risk sentiment, particularly under a scenario of weakened US growth or stagflation, remains the key downside risk.

Strong issuance

Primary issuance in Asia G3 currency bonds surged to US$22.2 billion in June, up from US$13.3 billion in May. Year-to-date supply reached US$115.1 billion, marking a 32.6 percent increase from the same period last year3. Key issuers included Hyundai Capital America (US$3.5B), MTR Corporation (US$3B), HK SAR Government (US$1B), Hanwha Life Insurance (US$1B), Industrial Bank of Korea (US$1B), and State Power Investment Corporation (US$1B).

Fund performance

Fund gained 0.55 percent in June

The Fund’s positive performance in June brings its one-year returns to 4.49 percent. Returns were driven by both coupon income and a decline in interest rates.

Source: Morningstar. Performance as of 30 June 2025, SGD basis, with dividends and distributions reinvested, if any. Performance figures for 1 month till 1 year show the per cent change, while performance figures above 1 year show the average annual compounded returns. Benchmark: Since inception – 2 May 2021: 6-month SIBID rate; 3 May 2021 – 7 Apr 2022: 12M Bank Deposit Rate; 8 Apr 2022 – Present: 6-month Compounded Singapore Overnight Rate Average. Past performance is not necessarily indicative of future performance.

Return vs long-term average

Fund's June return beat its long-term average

The Fund’s return in June 2025 is over three times higher than its average monthly return of 0.16 percent going back five years.

Source: UOBAM, Factset, as of 30 June 2025. Fund performance is sourced from Morningstar and 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. Past performance is not necessarily indicative of future performance.

Yield spread vs long-term average

Tighter yield spread than average

The Fund’s yield to maturity as of 30 June 2025 stands at 3.46 percent. This puts its yield spread over US Treasuries at 116 bps, slightly wider than in the previous month but tighter than the fund’s five-year average of 121 bps. This yield level suggests that the Fund continues to offer an attractive pick-up above US Treasuries while not being overly stretched relative to its historical average.

Source: UOBAM, Factset, as of 30 June 2025

Volatility vs long-term average

Lower than average

The Fund’s current three-month volatility is 0.44 percent, lower than the average three-month volatility of 0.68 percent, looking back over the past five years. The Fund’s current volatility is also significantly lower than the 3.56 percent average three-month volatility of its Morningstar peer group over the same period.

Source: UOBAM, Factset. Current three-month volatility from 31 Mar - 30 Jun 2025

Fund positioning

 Despite supportive market technicals and reasonable all-in yields, there is limited room for further tightening in credit spreads for investment grade bonds, which are currently hovering near historical lows last seen in 2006. Also, as we enter the second half of 2025, markets may be underestimating potential downside risks, reinforcing the need for a cautious and diversified investment approach. For July, the Fund’s key strategies are:

• Positioning in short-dated, high-quality credits to reduce sensitivity to rate volatility

• Investing in Eurodollar-denominated bonds with active currency hedging

• Maintaining a preference for financials over corporates given their strong fundamentals and attractive valuations

We continue to focus on coupon returns while diversifying across geographies and sectors. As such, the Fund is also invested in defensive sectors which are characterised by resilient balance sheets and systemic importance. These include industries such as utilities, telecommunications, consumer goods, insurance, and government-related entities.

Investor Q&A

Q: How is the United SGD Fund managing to maintain its yields despite the pressure on SG bond rates?

Interest rates have generally been trending lower. While this may eventually impact the expected portfolio yield of the United SGD Fund, we are actively managing the portfolio to mitigate this effect. Our strategy entails careful optimisation of each investment within the portfolio. We also aim to be opportunistic and nimble in identifying opportunities that offer the best relative value on a risk-adjusted basis across countries and sectors. Through disciplined active management, we aim to preserve yield while maintaining a prudent risk profile.

Q: How might recent US tariff developments affect the Asian bond market?

Asia’s credit fundamentals remain largely intact. The region continues to see more credit upgrades than downgrades, although sovereign-related downgrades linked to Chinese government entities have introduced pockets of concern. For now, these have had limited impact on broader market performance. Investment grade corporates in Asia continue to show improving credit metrics, and fallen angel risk remains muted.

Q: What is the United SGD Fund doing to counter rising geopolitical risks?

The Fund’s strategy remains focused on caution and resilience. Its diversified portfolio spans defensive sectors and geographies and offers resilience against external shocks. We will continue to monitor macroeconomic and geopolitical developments closely, and anchor our strategy in quality, defensiveness, and stability.

If you are interested in investment opportunities related to the theme covered in this article, here is a UOB Asset Management Fund to consider:

$UNITED SGD "A" (SGD) INC(SG9999010805)$

United SGD Fund Website | Factsheet (May 2025) | Prospectus

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.

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All information in this publication is based upon certain assumptions and analysis of information available as at the date of the publication and reflects prevailing conditions and UOB Asset Management Ltd (“UOBAM”)'s views as of such date, all of which are subject to change at any time without notice. Although care has been taken to ensure the accuracy of information contained in this publication, UOBAM makes no representation or warranty of any kind, express, implied or statutory, and shall not be responsible or liable for the accuracy or completeness of the information.

Potential investors should read the prospectus of the fund(s) (the “Fund(s)”) which is available and may be obtained from UOBAM or any of its appointed distributors, before deciding whether to subscribe for or purchase units in the Fund(s). Returns on the units are not guaranteed. The value of the 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(s).

Please note that the graphs, charts, formulae or other devices set out or referred to in this document cannot, in and of itself, be used to determine and will not assist any person in deciding which investment product to buy or sell, or when to buy or sell an investment product. An investment in the Fund(s) is subject to investment risks and foreign exchange risks, including the possible loss of the principal amount invested. Investors should consider carefully the risks of investing in the Fund(s) and may wish to seek advice from a financial adviser before making a commitment to invest in the Fund(s). Should you choose not to seek advice from a financial adviser, you should consider carefully whether the Fund(s) is suitable for you. Investors should note that the past performance of any investment product, manager, company, entity or UOBAM mentioned in this publication, and any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets is not necessarily indicative of the future or likely performance of any investment product, manager, company, entity or UOBAM or the economy, stock market, bond market or economic trends of the markets. Nothing in this publication shall constitute a continuing representation or give rise to any implication that there has not been or that there will not be any change affecting the Funds. All subscription for the units in the Fund(s) must be made on the application forms accompanying the prospectus of that fund.

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