SGD Rates and Bonds Weekly (updated)


Economic News
May Industrial Production +2.1% YoY vs expected +0.1%
May Industrial Production +1.2% MoM vs expected -0.5%


Calm in SGD rates into month end and USDSGD well behaved to close the month and half year at the 1.26 level, SGD weakening just 3% against the USD year to date.

Industrial production figures better than expected and the new property measures onshore along with the EM rally last week, kept the bears at bay. 6M SOR eased lower back to 0.36% as fears abated and the bonds rallied back hard after the 10Y SGS auction last Wednesday along with paying back of the basis swaps.

SGD rates did not react to the bond market moves, having outperformed the sell off so far. The new support levels for the 5Y and 10Y now looking like 1.50% and 2.50%.

A neutral stance is still warranted, going into the NFP numbers this Friday and the dominance of US numbers in the global market outlook. The 1Y1Y SGD fwd is strangely higher on the week at 0.87% (+5 bp) which is a clear sign of market expectations. Going ahead, steepening still looks like the main trend. The EM slowdown, as evidenced in the weaker PMI’s of the region yesterday is likely to exert pressure on the USDSGD towards the upside.


Heightened volatility in the past month has left the market quite bruised from swings of 5-10 bp each day. That is the new norm.

The new 10Y SGS took off like a fish in water, coming out at 2.85% and never looking back breaking under 2.5% on Friday. Short end papers saw massive demand as the market scrambled to cover for the SGD 6.2 bio maturity due on 1 Jul which was only replaced by SGD 1.5 bio of the new 10Y. As such, the <5Y papers had a massive run up in price which was exacerbated by the announcement that SGS 3m tbills would be phased out from 2H13 onwards.

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The lack of supply left the market quite high and dry for papers leading to the 16-30 bp rally.

Going forward, we should to see profit taking into Friday. Particularly the long ends where we have the 20Y bond back under 3%.

The 6M fwd fwd chart for the SGS and IRS shows Jun 2021 trading expensive to the new 10Y 2023 and also, a slight depression in the 5Y irs relative to the 4Y and 6Y.