SGD Rates and Bonds Weekly


Economic News
Sep Electronics Sector Index 50.3  vs expected 51.2
Sep PMI 50.5 vs expected 50.7
Foreign Reserves USD268.10 billion


Largest foreign reserves recorded in history yet again after breaking the record in Aug. The USDSGD is looking good in the midst of the US shutdown confusion and we have the  3Q13 GDP slated to come on a Monday for once, on the 14th of Oct, which is seen as an unusual delay as the expectation was for the week before and the 12th the latest.

A quiet week in the SG space as rates dallied around in a tight range on the US govt shutdown. Spread sellers and more sellers kept rates capped, the short end not showing any signs of distress as USDSGD hung on to its mid NEER into the semi annual policy statement to be announced next Monday.

Market positioning building into shorts on an expected policy easing and getting ready to turn on the liquidity taps for a resolution on the US end. In all, the mood is turning negative and risk adverse which supports a case for lower rates.


I notice that GDP expectations are negative and managing expectations for a positive surprise and therefore USDSGD could see a nice leg down after the numbers next week. This should be a nice opportunity to pay in the short end when the 1-3Y tenors crash after the USDSGD move. It is all about managing expectations and underpromising to cheer the markets so we should not disappoint the audience.

The 6M fwd fwd chart with a peculiar kink in the 5-7-10.



As the textbooks go, we have flight to quality and Singapore is AAA so it warrants a mini rally. The market saw a decent rally in the 6-9 year portion of the curve which has been much unloved in the recent run up that favoured the long ends.

Real money accounts bought in decent clips and clients were also seen switching out of the 30Y into the 20Y given the tight spread between the two bonds for the new 20Y (auctioned end Aug) to hit a new lifetime high in price of 104.70 (> 5% gain)

It would seem that the momentum is coming back into the marketplace for all the global uncertainty and bonds will continue to find favour. There are not more auctions scheduled for the rest of the year which will give the market some room to breathe and to buy. Prices should be supported but the topside targets, I am unsure. We could see a decent re-allocation into SGS out of global reserve books after the UST default scare, yet the SGS market is relatively mini compared to the USD 9 trillion in treasury notes out there.  But we should be on an inflow mode (increased bank deposits) especially after the strong SGD continues, as we expect.


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SGD Rates And Bonds Weekly ( 01/10/2013