SGD Rates And Bonds Weekly

Economic News
Jul Money Supply M1 14.7% vs previous 18.3%
Jul Money Supply M2 7.4% vs previous 9.1%
Jul Bank Loans and Advances 17.6% vs previous 17.7%


Liquidity tap running at full stream as 6M SOR fixed at close to its year lows today, 0.32256% (low in June this year 0.32026%). The short end rates kept unchanged into month end as the curve steepened.

Despite the bond market sell off, the long end rates are holding in a tight range, suggesting a potential top in place until the FOMC on 19 Sep and room for a corrective pull back till then. The next week will be littered with major economic events including the BoJ and Non Farm Payrolls on Friday as well as elections in Norway, Australia and Germany.

The focus will swing into these and EM will enjoy a respite from their rather battered August. Chart wise, we could see a pullback of the 10Y irs to 2.75 and the 5Y to 1.72 after failing to break new highs particularly if the NFP goes well, all in accordance with Gibson’s paradox.

The 6M fwd fwd chart – 7Y looking just a tad steep vs the 5Y and 10Y, bonds looking cheap except for Sep 2020, Jun 2021 and Sep 2022.


Ugly 20Y auction which was followed by a furious sell off in the long end, rallying back into month end before selling off again yesterday.

”     Sept. 2 (Bloomberg) — Singapore stocks tumbled by the most
among developed markets last month as investors pulled cash from
Southeast Asia on concern about the future of global stimulus.”

All in order as banks continue their dump parade after the auction as news of AFS book losses mount globally in the great bond exit. Volume traded rose on the week with the bond auction and month end flows. Demand trickling in from real money accounts for the long papers after the auction with yields trading at over 2 year highs and the 30Y bond trading at its lifetime high of 3.6%.

I still advocate a mini rally even though most banks dare not recommend it, choosing to sell the idea of swap spread trades as the safer option. The risk remains that the upcoming FOMC will take the wind out of any rally but we have a good 2 weeks for that. Till then, bonds are likely to see a small recovery as the focus shifts from EM.


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SGD Rates And Bonds Weekly ( 27/8/2013