Top bond ETFs to watch in Singapore in 2025

What are bond ETFs?

A bond ETF (exchange-traded fund) is an investment fund that holds a diversified portfolio of bonds and trades on stock exchanges like individual shares. These funds provide exposure to the bond market without requiring investors to purchase individual bonds directly.

How do bond ETFs work?

Bond ETFs track the performance of a specific bond index or basket of bonds. The underlying holdings typically include:

• Government bonds: Such as Singapore Government Securities (SGS), which carry AAA credit ratings²
• Corporate bonds: Issued by companies, categorised by credit ratings from investment grade to high yield
• International bonds: Foreign government or corporate debt securities
• Specialised bonds: Including inflation-protected securities or emerging market debt

Bond ETFs generate returns through two mechanisms. First, they distribute regular dividends from the interest payments of underlying bonds, typically on a semi-annual or quarterly basis³. Second, when interest rates fall, existing bond prices tend to rise, increasing the ETF's net asset value.

Unlike individual bonds, bond ETFs trade throughout market hours, providing greater liquidity than traditional over-the-counter bond trading⁴.

Advantages and disadvantages of trading bond ETFs

Understanding both the benefits and limitations of bond ETFs helps inform your trading decisions.

Advantages of bond ETFs

Diversification benefits

Bond ETFs provide instant diversification across multiple bonds, reducing the risk associated with individual bond defaults. Singapore's ABF Bond Index Fund, for example, includes government bonds across multiple issuers, providing stability and reducing single-issuer exposure⁵.

Enhanced liquidity

Unlike individual bonds traded over-the-counter, bond ETFs trade on exchanges during market hours, offering better liquidity and price transparency⁶.

Cost efficiency

SGX-listed bond ETFs have expense ratios ranging from 0.20% to 0.50%⁷, typically lower than actively managed bond funds. The ABF Singapore Bond Index Fund, for instance, has an expense ratio of just 0.24%⁸.

Regular income

Bond ETFs distribute dividends regularly. Recent data shows SGX-listed bond ETFs have recorded 12-month dividend yields between 2.31% and 7.59%⁹.

Disadvantages of bond ETFs

Interest rate sensitivity

Bond ETFs are highly sensitive to interest rate changes. The ABF Singapore Bond Index Fund temporarily fell by 5.8% within a two-week period in March 2020 when 10-year Singapore government bond yields increased by 0.76%¹⁰.

Tracking errors

Bond ETFs may underperform their benchmark indices due to management fees and transaction costs. SGX-listed bond ETFs may have annual tracking errors ranging from 0.1% to 0.3%¹¹.

Credit risk

Corporate bond ETFs carry credit risk, particularly during economic downturns when underlying issuers may struggle to repay debt¹².

No maturity date

Unlike individual bonds, bond ETFs don't have fixed maturity dates, meaning there's no guarantee of recovering the full principal at any specific point¹³.

Current market conditions for Singapore bond ETFs

Several factors make 2025 an interesting period for bond ETF consideration:

Interest rate environment

With T-bill yields trending lower from recent highs, investors are exploring alternative income-generating options¹⁴. Current Singapore 10-year bond yields stand at approximately 2.29% as of June 2025¹⁵.

Market performance

Recent bond ETF performance has improved as interest rates have declined. The corporate bond ETF delivered a 6.7% total return in the past year, while the ABF Singapore Bond ETF performed well due to strong demand for government bonds during market uncertainty¹⁶.

Regulatory environment

Singapore maintains its AAA credit rating, which is higher than that of the United States and many other countries¹⁷. This strong credit quality provides stability and supports investor confidence in Singapore-denominated bonds.

Top bond ETFs to watch in 2025

1. Nikko AM SGD Investment Grade Corporate Bond ETF (SGX: MBH)

Key details:

• Expense ratio: 0.26%¹⁸
• Distribution frequency: Semi-annually
• 2024 dividend per share: $0.0319¹⁹
• Top holdings: Investment grade corporate and quasi-sovereign bonds

This ETF tracks the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index and focuses on Singapore dollar-denominated investment-grade corporate bonds. Recent performance shows steady growth, with the fund hitting its highest price in over a year as of June 2025²⁰.

2. ABF Singapore Bond Index Fund (SGX: A35)

Key details:

• Expense ratio: 0.24%²¹
• Distribution frequency: Semi-annually
• Recent yield: Approximately 2.27% per annum²²
• Top holdings: Primarily Singapore government bonds (over 80%)

This fund tracks the iBoxx ABF Singapore Bond Index and provides exposure to high-quality Singapore government and quasi-government bonds. The fund holds a diversified basket with maturities ranging from 1 year to 50 years²³.

3. iShares USD Asia High Yield Bond ETF (SGX: O9P)

Key details:

• Expense ratio: 0.50%²⁴
• Distribution frequency: Quarterly
• Past year total return: 5.83%²⁵
• Top holdings: USD-denominated high-yield bonds from Asian issuers

This ETF provides exposure to US dollar-denominated high-yield corporate bonds issued by Asian companies. It invests in securities rated Ba1 and below by Moody's and BB+ and below by S&P and Fitch²⁶.

4. Lion-Phillip S-REIT ETF (SGX: CLR)

Key details:

• Expense ratio: 0.60%
• Distribution frequency: Semi-annually
• Focus: Singapore-listed real estate investment trusts
• Yield characteristics: Offers bond-like income with equity-like growth potential

This ETF provides exposure to Singapore REITs, which offer regular distributions similar to bond interest payments while maintaining potential for capital appreciation.

5. iShares China CNY Bond ETF (HKEX: 2806)

Key details:

• Expense ratio: 0.35%
• Distribution frequency: Semi-annually
• Focus: Chinese government and high-grade state-owned bank bonds
• Currency: Renminbi-denominated

This fund offers exposure to the world's second-largest bond market with low correlation to Western markets, making it valuable for portfolio diversification²⁷.

How to trade bond ETFs with CFDs

What are CFDs?
 

Contracts for difference (CFDs) allow you to trade on price movements without owning the underlying asset. With bond ETF CFDs, you can potentially profit from both rising and falling prices.

Advantages of trading bond ETFs with CFDs
 

Leverage capability

CFDs allow you to trade with leverage, meaning you only need to deposit a margin rather than the full position value. However, remember that leverage amplifies both potential profits and losses.

Short selling opportunities

You can 'sell' (go short) if you believe bond ETF prices will fall, such as when expecting interest rates to rise.

Risk management tools

You can use guaranteed stops to limit your maximum loss before opening positions.

Trading bond ETFs: step-by-step approach
 

1. Develop a trading plan: Consider your risk tolerance, capital availability and market outlook. Take emotion out of decision-making by establishing clear entry and exit criteria.
2. Choose your bond ETF: Consider the ETF's underlying holdings, expense ratio, liquidity and correlation with your existing positions.
3. Analyse market conditions: Monitor interest rate trends, economic indicators and credit conditions that affect bond prices.
4. Implement risk management: Use appropriate position sizing and stop-loss orders to manage potential losses.
5. Monitor and adjust: Regularly review your positions against changing market conditions and your trading plan.

Key considerations for bond ETF trading

Risk factors
 

• Interest rate risk: Bond prices typically move inversely to interest rates. When rates rise, bond ETF values generally fall.
• Credit risk: Corporate bond ETFs face the risk of underlying issuers defaulting on their obligations.
• Currency risk: For international bond ETFs, exchange rate movements can affect returns for Singapore dollar-based investors.
• Liquidity risk: While ETFs trade on exchanges, underlying bonds may face liquidity constraints during stressed market conditions.

Regulatory protection
 

Bond ETFs listed on SGX operate under the Monetary Authority of Singapore's regulatory framework. Investor protection measures include segregation of client funds and regular auditing requirements²⁹.

Footnotes:

_{¹ Growbeansprout.com, "Top Singapore Bond ETFs: How to Choose the Best One for Your Portfolio", May 2025}

_{² MAS.gov.sg, "Understanding Singapore's Bond Market", 2025}

_{³ StashAway.sg, "Best Bond ETFs in Singapore and Overseas for Your Portfolio", May 2025}

_{⁴ StashAway.sg, "Best Bond ETFs in Singapore and Overseas for Your Portfolio", May 2025}

_{⁵ StashAway.sg, "Best Bond ETFs in Singapore and Overseas for Your Portfolio", May 2025}

_{⁶ StashAway.sg, "Best Bond ETFs in Singapore and Overseas for Your Portfolio", May 2025}

_{⁷ Growbeansprout.com, "Top Singapore Bond ETFs: How to Choose the Best One for Your Portfolio", May 2025}

_{⁸ StashAway.sg, "Best Bond ETFs in Singapore and Overseas for Your Portfolio", May 2025}

_{⁹ Growbeansprout.com, "Top Singapore Bond ETFs: How to Choose the Best One for Your Portfolio", May 2025}

_{¹⁰ TheInvestQuest.com, "SGX-listed Bond ETFs: Which are good enough for our readers?", April 2021}

_{¹¹ StashAway.sg, "Best Bond ETFs in Singapore and Overseas for Your Portfolio", May 2025}

_{¹² Growbeansprout.com, "Interest Rates Are Falling. Time to Look at Singapore Bond ETFs?", May 2025}

_{¹³ Growbeansprout.com, "Top Singapore Bond ETFs: How to Choose the Best One for Your Portfolio", May 2025}

_{¹⁴ Growbeansprout.com, "Interest Rates Are Falling. Time to Look at Singapore Bond ETFs?", May 2025}

_{¹⁵ TradingEconomics.com, "Singapore 10Y Bond Yield", June 2025}

_{¹⁶ Growbeansprout.com, "Interest Rates Are Falling. Time to Look at Singapore Bond ETFs?", May 2025}

_{¹⁷ Growbeansprout.com, "Interest Rates Are Falling. Time to Look at Singapore Bond ETFs?", May 2025}

_{¹⁸ Nikkoam.com.sg, "Nikko AM SGD Investment Grade Corporate Bond ETF", 2025}

_{¹⁹ Growbeansprout.com, "Nikko AM SGD Investment Grade Corporate Bond ETF (MBH.SI) Dividends", June 2025}

_{²⁰ Investing.com, "NIKO Stock Price | Nikko AM SGD Investment Grade Corporate Bond ETF", June 2025}

_{²¹ StashAway.sg, "Best Bond ETFs in Singapore and Overseas for Your Portfolio", May 2025}

_{²² Growbeansprout.com, "Interest Rates Are Falling. Time to Look at Singapore Bond ETFs?", May 2025}

_{²³ Growbeansprout.com, "Interest Rates Are Falling. Time to Look at Singapore Bond ETFs?", May 2025}

_{²⁴ BlackRock.com, "iShares USD Asia High Yield Bond ETF", June 2025}

_{²⁵ StockAnalysis.com, "iShares USD Asia High Yield Bond ETF (SGX:O9P) Stock Price & Overview", 2025}

_{²⁶ StockAnalysis.com, "iShares USD Asia High Yield Bond ETF (SGX:O9P) Stock Price & Overview", 2025}

_{²⁷ TheInvestQuest.com, "SGX-listed Bond ETFs: Which are good enough for our readers?", April 2021}

_{²⁸ MAS.gov.sg, "Issuance: Singapore Savings Bonds", 2025}

_{²⁹ MAS.gov.sg, "Understanding Singapore's Bond Market", 2025}