SGD Rates and Bonds Weekly And… New Issue : HDB Adjusts Our Risk Free Rate


Economic News
Unemployment Rates 3Q13 1.8% versus previous 2.1%
Bank Loans and Advances Sep +15.7% YoY versus previous 15.4%


Higher rates reacting in line with higher US yields, the impression of a hawkish FED and minor EM turmoil. The charts rejecting the 200 day moving averages in a nice rebound as major equity markets gun for new records.

Light markets last week into the month end with most market players winding down for the year. Most active outright tenor has been the 5 y swap while the rest of the action was concentrated in the 5-6-7y fly and 2-3y spread which best expresses the hawkish FED expectation.

It still does not look like we have a clear trend with the market on cautious mode. Like I said last week, I still “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,the debt ceiling expiry in a couple of months” and I add, the EM turmoil in Latam and Thailand in our own backyard. Yet with the bounce up in rates, we could look for sell levels for short term gains.


Bonds sold off after the month end close with prices collapsing on Friday causing the 20-30Y SGS to invert. Worst hit issues were the 10 and 11 year tenors but buyers came out to pick bottoms led by real money accounts, keen to add some duration into year end.

The worst hit bonds were the off runs – Sep 2022, Sep 2024 and Sep 2030 whose yields rose 14-17 bp on the week. The 30Y bond favoured because of its deeper discount price at 96.45, yielding 2.935% compared to the new 20Y Sep 2033 at 105.50 yield 3%.

Volumes have not been excessive suggesting the market is winding down for the year end, allowing HDB to launch a new 4Y bond today.


ISSUER: Housing and Development Board
RATING: Unrated
FORMAT: S274 & 275 and Reg S Bearer, Fixed Rate Notes (off Issuer’s S$22bn Multi-currency MTN Programme)
STATUS: Fixed Rate, Senior Unsecured
ISSUE SIZE: S$1bn (with an option to upsize)
SETTLEMENT DATE:  13 November 2013
MATURITY DATE:    13 November 2017
COUPON DATES: 13 November and 13 May (First Pay: 13 May 2014)
COUPON: 1.875% s/a, ACT/ACT, Following Business Day Convention, 70bps above 4yr SOR @ 1.175%
DETAILS: S$250k x S$250k / MTN Prog / SGX-ST / Singapore Law

4Y IRS is at 1.16% today which makes the coupon likely at 1.86%. The SGS 5Y is yielding just 0.65% (5Y rates at 1.49%).

In September, HDB did a 5Y new issue at 55 bp over the 5Y rates and it was thought then that the spread was generous. Nothing can beat this 0.7% premium that a government linked entity is paying today and I cannot recall from memory when they have paid more, except for the odd failed issue that came in the heart of a crisis.

Clifford Capital paid about half that for their 5Y USD issue last week.

This new 4Y HDB should fly off the shelves whilst the past issues can blush and adjust themselves lower in price. For its pick up over govis, this would be rather value for money considering that HDB charges 2.6% for mortgages. But I would like to highlight what cost of protection is for some Singapore credits in the CDS space.

Singtel 5Y USD +0.60%
SPowerassets 5Y USD +0.61%
Temasek Holdings 5Y USD +0.59%
DBS Subordinated USD 5Y +1.08%
OCBC Subordinated USD 5Y +1.08%
UOB Subordinated USD 5Y +1.08%

Perhaps it is not so much the issue of credit quality but of market depth and of demand which appears sorely saturated just because HDB is not guaranteed by the Singapore government ?

Related article

 SGD Rates And Bonds Weekly ( 22/10/2013