SGD Rates and Bonds Weekly
Feb CPI. +1% MoM vs expected 0.4%. +4.9% YoY vs expected +4.1%.
CPI nailed it in the coffin for the USDSGD yet IRS remains directionless without the SGD story to power it lower despite the rally in the UST which was buoyed by the uncertainty of Cyprus and the Fed buying back USD 11 bio in the market.
News on the equity front is none too promising with EM stocks suffering their worst quarter since 2008 (Thai SET & Jakarta both down on the week) which is holding the short end rates up as well as the Japanese year end. Basis swaps seen supported.
Flows were light with the 5Y irs testing 100 day m.a. support on local selling interest and 10Y irs holding unchanged. Overall local banks in charge.
Expect a quiet week into Easter weekend, coupled with the upcoming SG MPS in early April. The assessment is that it is difficult to position meaningfully in the SGD rates market in the face of local bank interest and global uncertainties. Best to stay on sides.
Action centreing on the long ends on risk off trades when news of Cyprus hit. Most volume in the 10Y and Mar 2027 SGS which erased their gains into the week on profit taking out of trading books.
The new 5Y auction for SGD 3.1 bio, which will be the largest new 5Y issue in history, today will be likely to be a non event given the maturity of SGD 5.2 bio next week. Should see balance sheet buying support the yield into the 0.40-0.50% range. We are already seeing demand for tbills pick up with the 3M bill cut off at 0.22% yesterday vs last week’s 0.27%.
Cannot see yields going anywhere from here as the market sits comfy. Possible rally after the auction on the usual profit boosting jam up but will not expect that to last beyond 5-10 bp.
1. Bank of China 1Y 0.9% SGD 203.50 mio
2. ASL Marine 4Y 4.75% SGD 100 mio. Current Px 100.50/101.00
3. CDL 10Y 3.48% SGD 150 mio. Current Px 98.00/98.50
New 5Y Bond Auction Cut Off 0.57%. Coupon set at 0.50%.
Bid Cover 1.7 times which is decent considering its big issue size.