SGD Rates And Bonds Weekly

Economic News
Aug Electronic Sector Index 51.3 vs expected 50.5
Aug Purchasing Managers Index 50.5 vs expected 51.9
Aug Foreign Reserves $261.87 bio vs previous $261.1 bio


Light week in rates for all the global uncertainty into the NFP. Rates rose into the FOMC and worries of the Fed taper on further EM capitulation. A brief relief rally yesterday and today on the back of UST yield correction after NFP.

Most trades in the belly of the curve with the 3-5Y seeing interest, the long ends quite untouched and mostly quiet. Liquidity still flushed in the system capping the short end 1Y rates while the rest of the curve remained realistic.

My favourite 1y1y forward broke briefly above 1% last week in a well supported run up while the 5y5y forward is lackadaisical on account of the massive paying interest 2-5-10 butterfly over the past fortnight. That should start to wane on carry considerations in the near term unless we have new developments on the taper front.

The SGD has resumed its strengthening path on the EM stabilisation and a string of positive reports on economic strength with Moody’s linking Singapore’s economy future to China’s outlook. USDSGD is back to -58 bp off the mid NEER today which is a good sign for rates to be capped for the time being.

“A sharp slowdown in the Chinese economy will have a negative impact on Singapore, but it will not be as bad as the 2008 global financial crisis ”

With the FOMC looming in a week’s time and the Syria vote this week in US Congress, I would expect SGD rates to trade in range and trend lower on global risks whilst it is still too early to be positioning for Oct’s MPS.

Economic Outlook



Bonds proving popular despite the sell off in the UST. Real money accounts seen on the bids despite local banks shortening their duration and some swap spread unwinds. The mood is less dismal as yields, at 2Y highs for the >10Y papers start to draw in demand.

The belly bonds, in particular, the 5Y lost appeal and saw selling interest for a >1.5% differential off the 10Y. And thus the long ends continue to find favour, with the newly auctioned 20Y bond regaining lost ground and closing in on its auction price of 99.639 (3.4%).

I still think we are done with selling for a while even if yields chop around in the current range. Bonds are safe again.


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