SGD Rates and Bonds Weekly


Economic News
Jun Electronics Sector Index 51.2 vs expected 51.0
Jun PMI 51.7 vs expected 51.0

USDSGD at a new 12 month high, breaking 1.28 for a day before trading at its 1.2780 level today some 29 bp below mid NEER.

The NFP was the tipping point for the market, tipping the 10Y towards a new 2 year high but failing to break the 3% handle, last seen in early 2011. Curve continued on its steepening mode as the 6M SOR remained under pressure on the flood of the liquidity in the short end on possible intervention.

Another driver would be SGS weakness after the month end rally with the market generally paid and expecting the move up in rates, capping offers  in the upmove yesterday.

We have the 2Q GDP numbers out this Friday, 12th. Expectations will keep a rein on rates into the weekend. Meanwhile, a potential Temasek issue on the table is likely to exert downward pressure on the long end rates, particularly if they issue in SGD. In addition, we have several regional central bank meetings as well as the Fed minutes on Wed.

Running a paid gambit could prove potentially futile in the near term as the market recalibrates for the next move which is likely to be in  credit deterioration and equity re-pricings. I would trade on the short side for the short term.


SGS continued on their rampage down after rampaging up after the new 10Y auction which saw its yield hit a low of 2.4%.

The correction was swift and sudden but not short of buyers on light to short positioning into the rally early last week where rumours adrift mentioned the presence of offshore buyers including sovereign wealth funds and central banks.

Thus during the sell off yesterday, yields gapped 20 bp higher on market open but quickly rallied back to close the day just 8 bp higher and unchanged on the short end to 5y tenors where extreme short supply continues to dominate trading direction.

Bond swap spreads widened back out as a result, continuing to correct after they were decimated the months before.

No reason to be bullish with 2Y yields at 0.17% and 5Y at 1.37%. Even the new 10Y SGS which was auctioned at 2.85% just 2 weeks ago is 0.30% lower today. As such, would prefer to sell swaps over buying bonds at the moment.

The fwd fwd chart still pointing to an expensive Jun21.