SGD Rates And Bonds Weekly

Economic News
Jul CPI +0.3% MoM vs expected +0.6%
Jul CPI +1.9% YoY vs expected +2.1%
Jul Industrial Production -1.9% MoM vs expected -0.1%
Jul Industrial Production +2.7% YoY vs expected +1.8%


Economic numbers gave their verdict. Lower CPI and a sequential decline in industrial production points to weakness ahead and a modest 3Q GDP pullback. That is not enough to change market consensus that the Oct MPC will be unchanged.

SGD rates in paralysis mode as the EM crisis rages on with the SGD/MYR at a 15 year high. Thus rates are unable to do much as the short end remained well supported despite US rates backing lower and the SOR, well suppressed.

The curve did flatten along with the US even as we prepare for the new 20Y SGS auction tomorrow.

Looking ahead into the month end and the auction tomorrow, rates are likely to remain listless.  And given the buzz going into September which is a dangerous month for rates with all the happenings around the globe, I would expect SGD to go along with a potential corrective pullback in EM and for rates to head lower into month end, especially after the 20Y auction.

I have no trade ideas for near term trades. Would still keep a look out for carry trades in steepeners and maintain bullishness in the 1y1y fwd and the 5y5y fwd.

The 6M fwd fwd chart – no new developments except that the bonds are starting to look cheap relatively.



The long end 10Y bore the brunt of the selling into the 20Y auction even with its palatable auction size. The 30Y and current 20Y demonstrated surprising resilience which is not a surprise, really, because the 20Y yield is back to 2007 levels.

The market desperately needs this auction to deliver a decent cut off yield on the high side to put some money back into the pockets for 3Q budgets. Thus it is safe to assume that we will have a highly successful auction tomorrow and a mini rally to follow. All expectations should, however, be tapered by the September tapering due to in the mid month FOMC, which coincides with the German elections amongst other key global events.

Some key notes on the new 20Y bond (plagiarised)

Tenor :20 Years
Amount Offered :SGD 1.7bn
MAS’ Intended Tender: SGD200mio
Issue Code NZ13100V
ISIN Code SG3261987691
Settlement Date: 2 Sep 2013
Maturity Date :01 Sep 2033
Auction date: 28 Aug

  • Issue size is net SGD 1.5bn given that MAS will be tendering SGD200mio for themselves.
  • This will be the last of 2 SIGB auctions for this year with a reopening of a non benchmark 2Y, SGS Apr16 next month end. As such, effectively this will be the last long end bond auction for this year.
  • At current levels, the indicative range for the new 20Y falls in the range of 3.30%-3.25%, and a mid-bond/swap spread of 23bps. The current 30Y, SIGB 04/42, has been holding well in 3.35-3.40% range and that has kept the long end part of the 15Y-30Y flattish despite the recent sell-off across the curve.
  • UST moves aside, we think that demand likely to be decent from real money accounts for benchmark and yield pickup . We reckon that bulk of real money accounts missed out in the last 10Y auction and will be looking to buy this last long end bond for the year. The last 10Y auction that we had end June came in at 2.85% and massively rallied to 2.35% become succumbing to current levels of 2.67/2.63%.

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SGD Rates And Bonds Weekly ( 20/8/2013