SGD Rates and Bonds Weekly
Sep Retail Sales Ex Auto +0.3% YoY vs expected +1.8%
Sep Retail Sales +0.5% MoM vs expected +1.0%
Sep Retail Sales -5.9% YoY vs expected -4.4%
Oct Electronics Exports -1.4% YoY vs expected -5.4%
Oct Non Oil Domestic Exports +2.8% YoY vs expected -1.1%
Not much of a choice all around the world and the same it was in Singapore after Yellen last week and US’s commitment to competitively devalue their currency in keeping the ZIRP intact. SGD rates edged lower last Thursday with caution and has kept to its selling tone since.
Liquidity has not been excessive nor exuberant with the market moving into holiday season and certain key market players on leave.
The 5Y irs bore the brunt of the selling as the market extended into 5-10Y steepeners for taper comfort, breaking the 1.50% handle but not in a hurry to go much lower. Similarly, the short end is holding up well into the year end, with the 1y1y forward rate hugging tightly to the 200 day moving average line.
The 10Y irs could be seeing a game changer with all the paying interest. The 2.6% has been the support and resistance for the past 2 months and appears coiling up for a bounce into year end.
I still think the complacent tenors in the 1-3Y could see some action into year end especially if carry trades are to be in vogue, using the SGD as funding currency.
Bonds keeping their cool and a level head for the week. Prices edged higher in light trading with good demand for curve extension out of the 5Y at 0.56% into the longer 2019-2021 tenors that supplied slightly better yields. Biggest beneficiary was the Sep 2018 which yields 0.8%, a 0.25% pick up from the Apr 2018. Yet the Sep 2018 remains the highest premium bond on the entire curve, at 115.00 cash price, amortising 3% away a year.
The long ends >10Y tenors looking peaky, with only the 30Y holding up from lack of liquidity.
I repeat what I said last week, “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”.
Looking at the SGS 6M fwd fwd yield breakdowns and observing the huge, glaring kinks in between, it would be tough to call it a trading market.