SGD Rates and Bonds Weekly
Oct Electronics Sector Index 51.0 vs expected 50.9
Oct PMI 51.2 vs expected 51.0
SGD rates settling into SGD strength and comfort zone for the week, ignoring half of the US move on the back of the NFP.
Light paying momentum earlier in the week quickly turned to profit taking and position squaring causing the upmove to be mitigated. Evidently, market players think that rate moves should be faded into year end as liquidity evaporates into the holiday season.
Steepening trend observed with the 10Y irs rejecting the 2.5% support although 2.65 has proven to be a hurdle in the past 6 months. The 5Y irs appears more sticky to the 1.5% barrier, coming off quickly after the Monday spike.
It could prove to be all about the currency in the weeks ahead. The USDSGD on the uptrend again which could put a dampener on carry trades. The complacent tenors in the 1-3Y could see some action into the year end. Looking at the 1y1y forward appears to have exhausted it move down and the 200 day m.a. is proving to be its new best friend in the past month. There is no harm in positioning for a quick bounce especially if the regional turmoil in Thailand worsens.
Bonds bucked trend with the 5Y-6Y SGS outperforming on the week, rallying around 6 bp in a single breath. The single largest and widest HDB issue last week with a 1.875% coupon pushed 5Y bonds to rally hard to attempt to break the 0.6% yield resistance, coming off only slightly on Monday despite the market short squeeze.
The absence of large maturities at this time of the year and the fact that volumes transacted have been very light suggests that it is an isolated move and unlikely to erupt into a major rally.
Long ends continue to drift lower with the Sep 2030 continuing to suffer after its sell off from the week before, its yield rose 9 bp on the week, making it the worst performing bond at 2.94% despite the Sep 2033 and Apr 2042 sticking to their inversion which is understandable with the 2042 cash price at 95 and down over 10% on the year.
Volumes suggest that the market is sitting comfy with their positions. Thus any move ahead would be instigated by portfolio adjustments for the year end which, if history is anything to go by, would be in position lightening.