425
430
435
440
445
450
455
460
465
470
475
30-Dec-11
30-Jan-12
29-Feb-12
31-Mar-12
30-Apr-12
31-May-12
30-Jun-12
31-Jul-12
31-Aug-12
30-Sep-12
31-Oct-12
30-Nov-12
31-Dec-12
Figure 5:
Global Bond Index - Barclays Capital Global Aggregate Total Return Index
EXECUTIVE DIRECTOR’S LETTER
Unit Trust Corporation
Annual Report 2012
33
whereas the worst industry performer, the S&P
Coal and Consumable Fuels Index, declined
26.13 percent. Canada’s S&P/TSX Composite
Index increased 4.00 percent compared to
2011’s performance of negative 11.07 percent.
The S&P Euro 350 Index soared 13.75 per-
cent while the UK’s stock market increased
5.84 percent, up from negative 10.64 percent
and negative 5.55 percent in the previous
year. Belgium and Denmark outperformed,
advancing 33.99 percent and 28.09 percent
respectively with Europe’s largest economy,
Germany, following closely behind at 25.24
percent. Spain posted the worst performance
in the region of negative 4.76 percent followed
by Greece which returned negative 2.35 per-
cent and Portugal with negative 2.22 percent.
The Emerging Markets also exhibited im-
proved equity performance with the MSCI
Asia Pacific Index providing returns of 13.61
percent, while the S&P Latin America 40
Index posted comparatively weaker returns
of 3.30 percent. These were, however, signif-
icantly better than their 2011 performances
of negative 17.31 percent and negative 20.69
percent respectively. Asian markets were led
by the Philippines, India, Thailand and China
which posted returns of 34.70 percent, 27.86
percent, 26.87 percent and 18.73 percent
respectively. Malaysia showed the region’s
poorest performance at 6.84 percent. Latin
America saw Colombia outperforming the
pack with returns of 19.91 percent, with
Mexico and Peru following, posting 18.24 per-
cent and 15.03 percent. Chile trailed behind
returning negative 2.67 percent followed by
Brazil which grew 5.93 percent. Figures 1-4
below illustrate the movements of the major
global indices during 2012.
(Figures 1,2,3,4)
International Fixed-
Income Market Performance
The international fixed-income markets gen-
erated moderate gains in 2012. The Barclays
Capital Global Aggregate Total Return Index
returned 4.32 percent for 2012. Figure 5 re-
fers. Against the backdrop of low central
bank policy interest rates globally along with
the other accommodative measures imple-
mented in order to keep short-term interest
rates low, US treasuries lagged the market. In
contrast, given the shift in investor appetite
from a “risk-off” to a “risk-on” disposition in or-
der to secure higher yields, speculative grade
bonds significantly outperformed invest-
ment grade bonds. New global corporate
bond issuances climbed to a 3-year high of
over US$3.0 trillion in 2012, while the corpo-
rate default tally also reached a 3-year high
as a total of 82 corporate issuers defaulted
around the world.
Local Fixed-Income
Market Performance
Trinidad and Tobago’s Central Bank main-
tained its accommodative monetary policy
stance in light of sluggish economic activity
and falling inflationary pressures, lowering
the Repo Rate 25 basis points from 3.0 per-
cent to 2.75 percent in 2012. Although excess
liquidity levels declined by 30.23 percent in
2012, they remained relatively high, ending
the year at $3.97 billion. High liquidity has
been fueled by continued weak private sec-
tor credit and relatively high net domestic
fiscal injections. Short-term domestic interest
rates have thus remained very depressed.
In response to the falling liquidity levels, do-
mestic 3-month treasury yields rose by 11 ba-
sis points over the year from 0.28 percent to
0.39 percent, while the yield on the 6-month
treasury rose by 15 basis points from 0.32
percent to 0.47 percent. The yield on the US
3-month treasury closed the year at 0.06 per-
cent, resulting in a widening of the spread
between the 3-month TT and US instruments
from 26 basis points to 33 basis points. There
was an uptick in domestic money market
rates as well, with the yields on short-term
money market instruments rising by 22 basis
points on average. Refer to
Table 1
.
Few new domestic fixed-income opportu-
nities presented themselves in 2012. In light
of the high excess liquidity in the financial
system and the scarcity of investment op-
portunities, over-subscription of public sector
issues persisted, posing continued challenges
for fixed-income investors. As a consequence,
yields declined at the medium to long-term
TREASURY BILLS
MONEYMARKET INSTRUMENTS
Year/Tenor 90 Day
(%)
180 Day
(%)
30 Day
(%)
60 Day
(%)
90 Day
(%)
180 Day
(%)
365 Day
(%)
2008
7.06
7.61
6.18
6.53
6.75
6.99
7.09
2009
1.36
1.52
0.67
0.75
0.95
1.59
1.93
2010
0.37
0.32
0.43
0.58
0.75
0.90
1.06
2011
0.28
0.32
0.15
0.25
0.35
0.43
0.58
2012
0.39
0.47
0.30
0.40
0.55
0.70
0.90
Table 1:
Domestic Money Market Rates (2008-2012)
