Economic News
Jun Retail Sales Ex Auto +2.6% YoY vs expected +3.3%
Jun Retail Sales -4% YoY vs expected +2.3%
Jun Retail Sales -6.9% MoM vs expected -1.8%
Jul Electronic Exports -7.6% YoY vs expected -7.8%
Jul NODX -0.7% YoY vs expected -2.9%
Jul NODX -1.1% MoM vs expected +2.1%


Rates did their duty and edged up quietly to try for their July highs, this time in slightly more measured moves as the rest of EM continues to slide. The USDSGD testing the July 1.28 again today and the SGD underperforming its NEER.

Not much by way of volume and keen sellers seen at the top, in particular the long end >10Y for a flattening of the curve. The 5Y irs was well supported, on the other hand, making it the most reactive part of the curve these days.

Market seems unwilling to put on any hasty new positions, preferring to sit out this mini EM crisis on the side. The short end fixings have been well controlled as central banks try to minimise any panic, thus leaving very little on the table for payers of rates because of the hefty carry loss. Thus rate changes have been muted, compared to the US and the SGS for the curve after a week to end unchanged in the 1Y to 14 bp higher, pivoting in the 5Y and 10Y.

The recent levels indicate that rates have found a new support. Chartwise, the 50 m.a. are all crossing up, in a new trend. The short end 1Y still looks like a dead pulse rhythm and tightly muscled, which makes it hard to consider outright paids. Worth exploring would be steepening trades that deliver positive carry that stretches past the realm of central bank control. The 5-10 would be worth a look even as we are sitting near the high and the 5y5y fwd is stubbornly holding above 4%. Yet a pull back in UST yields, say tomorrow after FOMC minutes, could give opportunity to pay some.

The 6m fwd fwd chart shows the 10Y as relatively cheap.


Bonds continue to flounder with the 10Y SGS hitting a 1 month high. No cause for alarm with yields still well under its auction cut off. The volumes have not been pretty light for the week since last Tuesday and players are choosing to stay light into the 20Y bond auction announcement expected tomorrow after market close, for auction next Wed.

Long end 10Y and above yield have risen some 16 to 22 bp on the week with the shorter tenors still showing strong demand on lack of supply. The expected size for the new 20Y is at SGD 2 bio, which is the minimum benchmark size and the curve interpolation between the 2030 and 2042 SGS (which is very flat) indicates a mid yield of approximately 3.3%, as of yesterday’s closing.

The current yield levels for the 20Y is trading where the first 20Y Mar 2027 was issued at back in 2007. 6 years on and we are back to the same yield range therefore, I daresay, we shall find interested buyers if not now, then during the auction. This is especially if the FOMC minutes give the UST some respite tomorrow on the taper front.


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