SGD Rates and Bonds Weekly
Aug Industrial Production -1.4% MoM vs expected 0.4%.
Aug Industrial Production 3.5% YoY vs expected 4.9%
Quiet into the month end and choking on the US govt partial shutdown, rates were active in the short end – 5Y tenors while the rest of the curve was mostly quiet.
Market positioning would appear very thin with few players willing to take on risk in the volatile climate. With the MPC looming ahead in the 2nd week of Oct along with the GDP numbers, the expectations are for an unchanged monetary policy stance which leaves SGD rates at the mercy of global developments.
USDSGD is holding to its 200 day m.a. as expected and does not appear to be in a hurry to over step itself. Indeed the price action saw SGD lagging slightly. With the exception of the short end 1-2y tenors, rates are similarly undecided and content to drift about their 100 day moving averages from the >3Y tenors for the curve to close the week 2 to 6 bp lower.
Impossible to make a call on rates except that the Taper is likely to take a breather which is a good opportunity to put on the flatteners.
The 6M fwd fwd chart.
Duration extension into month end gave the new 20Y a much needed boost against the rest of the curve whilst the short end 2-5Y tenors were sold off into the 2Y reopening auction last Thursday. Sellers were mostly the investment books sitting on the papers that were yielding just 0.25-0.35% which made it an excellent to take profit before the end of the quarter.
The reopened 2Y (maturity Apr 2016) was auctioned off at 0.42% in an auction that most perceived as lukewarm on the low bid/cover ratio. This capitulated into a month end sell off for the short end to belly (8Y) part of the curve again on suspected investment book activity. Only the long end >15Y bonds were spared and real money accounts came out to pick bottoms in the rest of the curve as the month drew to a close.
Price action has been chaotic, as described by an interbank dealer. The market tottering to and fro from the actions of a few.
Bonds would seem to have found favour again as the Taper idea gets increasingly remote. The Sep 2024 would appear to be most value for money bond on the chart with its yield at 2.57% at the moment. I hesitate to have any medium term views.
SGD Rates And Bonds Weekly (tradehaven.net) 24/9/2013