SGD Rates and Bonds Weekly

Economic News
2Q Final Unemployment Rate 2.1% vs previous 2.1%
Jul Retail Sales Ex Auto 2.5% YoY
Jul Retail Sales -7.8% YoY vs expected -1.5%
Jul Retail Sales -5.3% MoM vs expected +1.5%
Aug Electronic Exports -9.2% vs expected +0.5%
Aug Non Oil Domestic Exports -6.2% YoY vs expected +2.4%
Aug Non Oil Domestic Exports -6% MoM vs expected +0.9%


Rates peaked last Tuesday to sell off steadily on poor US economic data and developments in the race for the new Fed chair yesterday. Most of the tenors have broken under their 50 day moving average support even as the USDSGD hugs to its 100 day m.a. support and the fixings remain near their lows.

Most trades again in the short end to belly, 2 to 5y tenors, with light flows in the long ends. The fwd fwd rates also broke under their 50 day m.a. supports led by the 5y5y (broke under 4%, currently at 3.9%) and selling in the 2x5x10 butterfly after its early Aug run up.

Too early to conclude the new trend of lower rates despite the poorer NODX numbers as EM recovers. The entire picture is a challenge to envisage because rates are reacting to poorer US data and expectations of a dovish FOMC. The EM outlook is bleak with most economists now pushing their growth story out to 4Q hoping the market will write off 3Q performance. A bleak outlook should hardly be the precursor to renewed inflows and EM will have to work hard to regain investor confidence which is not an overnight affair.

Singapore is in EM space these days and, like it or not, will suffer geographical contagion effects especially now that focus has switched to Indonesia from battered India. I would expect rates to remain in its current zone after last week’s correction with attempts to head lower into and post FOMC given that market positioning is still probably skewed towards slight paids in the curve. I would expect USDSGD to show some life in the next fortnight as we head into month end and the Oct MPS, the 100 day m.a. is proving to be a strong support and we should see higher from here, its a good time to hedge those short end funding or lock in those housing loans.

The 7-10Y SGD is looking depressed again.


Bonds outperformed on the week pushing prices higher for the year’s profits. The new 20Y bond rose to 101.27 after a post auction low of under 98. The auction price was 99.639. Best bond of the week was the 10Y SGS whose yield crashed to a 1 month low yesterday, mark to market registers ringing profits everywhere. Market short squeezes in the 5Y, 10Y  and 30Y added to the buying frenzy with offshore participants allegedly involved.

There is a certain determination this round which makes it hard to consider going short. As such I would expect this move to sustain into the month end and the end of 3Q for our little one way SGS market. Investors and investment books would welcome this move for much needed profits which may trigger profit taking particularly after the single largest (and highest yielding 5y at 2.365% since 2008) HDB 5y issue last week for SGD 1.45 bio.

Personally I see no more value in the 10Y at under 2.5%, so if I had bought at 2.65%, I would take the 2% profit on the price and wait for the next trade.

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SGD Rates And Bonds Weekly ( 10/9/2013