Tuesday, March 6, 2018

Jan 2006 to Dec 2006 Singapore Government Bond Yield Curve

In one of my previous post, I spammed my readers with a bunch of yield curves from January 2007 to December 2009. The idea is to eyeball the data and verify whether was a yield curve inversion present before/during the Global Financial Crisis (GFC) and how well do changes in the yield curve over time provide us with ample warning of a stock market crash.

Unfortunately, the endeavour did not bear much fruit. The yield curve became more normal as the GFC unfolded. Still, I did observe that the yield curve was pretty much flat during the first quarter of 2007. Could I simply have selected the wrong period for analysis? Maybe the yield curve inverted before January 2007, became flat during the first quarter of 2007, and gradually became more normal?

In this piece, I shall continue spamming my readers with yield curves. This time round, the yield curves are from January to December 2006.

Fire up R! Automate the churning of the yield curves!

January 2006 SGS Yield Curve

February 2006 SGS Yield Curve

March 2006 SGS Yield Curve

April 2006 SGS Yield Curve

May 2006 SGS Yield Curve

June 2006 SGS Yield Curve

July 2006 SGS Yield Curve

August 2006 SGS Yield Curve

September 2006 SGS Yield Curve

October 2006 SGS Yield Curve

November 2006 SGS Yield Curve

December 2006 SGS Yield Curve

In the first half of 2006, the longer duration bonds yielded more than their shorter duration counterparts. However, the yield differential between bonds of different duration is not as wide as, let's say, June 2008. If you look at my previous post, the June 2008 yield curve looks the most normal, with longer-duration bond holders receiving higher yields for the risk they are taking.

Yet I digress.

It is only from September 2006 onwards do we observe the T-bills yielding higher than the longer duration bonds. Yes, there is some evidence of inversion, but the effect is muted. Coincidentally (or maybe I am reading too much into it), the inversion occurred at September/October 2006. If you take the collapse of Lehman Brothers (September 2008) as the start of the GFC, the small inversion preceded the GFC at ~2 years.

Do take my ramblings with a pinch of salt. It is just a mere eyeballing of the data and the conclusion that I draw from the data could be totally spurious.

I will be doing more investigation into this topic.

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