SGD Rates and Bonds Weekly

SGD RATES WEEKLY

Economic Data
Feb PMI 49.4 vs exp 50.3
Feb Electronics Sector Index 52.1 vs exp 49.7
Feb Foreign Reserves $259.14 bio vs $258.84 bio
2Q13 Manpower Survey 17% vs 1Q13 10%

SGS volumes have dropped since the 30Y bond auction on 26 Feb. The outlook has worsen for the bond market despite USDSGD stabilising at its new range with 1.25 proving hard to break.  Yet panic buttons are not being pressed as corporate supply continues to stagnate.  Would expect SGS to continue to outperform for lack of alternative and the central bank resolve in maintaining ample short term liquidity. An STI break towards its 2007 high could spur the market into action. Until then, would expect the central bank to continue the life support to encourage buyers.

6M SOR has also fallen along with the Eurodollar futures, potentially signalling a new trend and market comfort with the SGD at its current NEER strength.  Thus the SGD 5Y and 10Y irs are still finding the 1% and 2% levels as firm resistance.  SGD will continue to be a decent relative value sell on policy protectionism.

Corporate Bonds
Hearing new SGD 600 million HDB 3Y at SOR+35 bp cpn 0.943%.
Great value vs all the other issues so far, in particular the 11/2015 0.76% HDB paper issued last Nov and is still priced at 100.