SGD Rates and Bonds Weekly

Economic News
Sep CPI +0.1% MoM vs expected +0.6%
Sep CPI +1.6% YoY vs expected +2.0%

IRS

Core inflation +1.7% and the central bank is guiding 2014 inflation lower to 2-3%.

Lots to cheer about today with the release of the  semi annual Macroeconomic Review because the outlook is not bad. The inflation outlook is key which affirms the monetary policy to expect.

Rates have been keeping busy with chart supports and the UST rally enticing some risk taking back in the marketplace, to slam >5Y rates lower towards their 200 day moving averages. The 3Y broke the 200 day on selling pressure as well as the SOR fixing continued to limp lower.

The month end this week should see the market clamp down slightly on risk as we head into the home run stretch for traders. I see little impetus to be overly positioned in these markets especially with uncertainty arising in the Chinese markets as we head into a year end lull and the debt ceiling expiry in a couple of months. The reward of the next few pips down is just not appealing enough.

The 6M fwd fwd chart.

SGS

A nice week to close the month on a high. The 10Y SGS setting a new record low in yield since its issue in July at 2.11% on the 25th.The new 20Y auctioned in August would be the best performing bond in cash terms this year with its price now sitting on 7% of gains.

It is clear that next year’s auction calendar had something to do with the 5Y bond out performance on the week. Buyers also favoured the belly to 10Y tenors. Duration adjustments not expected for this month with market already positioned on the long side.

Medium term outlook is still bullish but not too much.

Related article

 SGD Rates And Bonds Weekly (tradehaven.net) 22/10/2013