Singapore Interest Rates : Are the Waters Safe ?
A quick glance at global 10 year bond yields and we note that Singapore has bucked the trend in the past 3 months.
With SG yields towering over the US, which has not happened many times in history, our curve is now looking quite surreal these days.
A friend just sent me this startling 6m interest rates chart, stripped from the HK, US and SG sovereign curves, and the results are quite eye opening.
The likelihood that the USDSGD panic attack has subsided is high because SGD forward points came off in a hurry today as the USDSGD saw a death defying drop this morning at 8 a.m. that could be due to a BIG COUNTER TRADE IN THE OPPOSITE DIRECTION a.k.a. intervention.
The 6m forward points have collapsed.
And with Indonesia with their surprise rate cut today, along with further EUR weakness, SGD has regained some ground against the NEER basket.
My thoughts.
- Perhaps the Jan surprise shift in SGD’s appreciation slope was a bad idea because it only drew attention to Singapore predicament of higher rates when inflation slows (and our monetary policy limitations)
- Loss of confidence in the Singapore growth story is mounting, hearing talk amongst global investors on the lowered growth prospects of Singapore, making the investment case a poor one
- Lack of global investor interest will remain in SGS even with the attraction of higher yields because the currency is now only expected to appreciate about 1% at best and the reputation of Singapore being a highly illiquid marketplace is well known
- The last time MAS intervened or was known to have intervened in bond buying was back in early 2000’s when the first 15 year bond was issued and the market tanked heavily leading to, if I remember correctly, some talk of central bank buying and also a reverse auction, although my memory fails me
- Higher short end interest rates may last for a while because it would dissuade short sellers of the currency from selling more – do note that if you have bought USDSGD, it now costs you 0.73% in carry if you roll it forward for 6 months ( 6M SOR 1.13% vs 6M Libor 0.40%)
I think we are living in new times and a world of unconventional monetary policies that central banks around the world are deploying to combat deflation which has suddenly become everyone’s problem as the oil glut remains.
Sticking to textbooks may have gotten us this far but some ingenuity may be necessary going forward and I have always considered capital controls quite childish.
Maybe a big round of WAGE HIKES would do the trick ? So what if it eats into corporate profits, the stock market can afford it.
i Would guess the demand for oil never dropped …
OIl prices dropped because of the strong correlation between USD and Oil. QE ended and imminent rate hikes coupled with QE from other nations caused the USD to go up and thus Oil prices to come down.
correct me if i am wrong
I would think it’s a supply glut. Overly optimistic consumption growth expectations led to overinvestment and overproduction. The oil rig count in US exploded and the high oil price in the past (100) may have artificially boosted projected IRRs of many made shale products. All is well, until end demand stops – I would personally look at FAI in China and growth in Europe
From last year ..http://52.77.202.71/market/the-oil-story-to-2020-and-beyond/
US shale production was completely underestimated and the US now produces close to 9 mio barrels a day with shale accounting for 3.3 mio
Iraq fears overblown as ISIS failed to capture the southern fields
Venezuela and Libya had supply outages which quickly resumed production
IEA production forecasts has been too low especially for the US
Global demand growth is slowing and is now at 1.1% from a previous 1.7% historical average
Massive liquidation seen in SGD fwds… at this rate, we can expect fixings to be 0.05-0.1% lower tomorrow.
ARE THE WATERS SAFE ? – TH
Take clue from the plankton bloom
http://www.straitstimes.com/sites/straitstimes.com/files/imagecache/ST_REVAMP_2014_STORY_PAGE_640X360/20150311/ckdeadfish110315e.jpg
http://www.straitstimes.com/news/singapore/more-singapore-stories/story/singapore-budget-2015-ava-taking-steps-address-fish-deat
3M SOR crossed 1% this week.
Coming off globally … not just us …tomorrow’s fixings will be lower. Not sure about SIBOR because that is more sticky.
3M SIBOR 0.9%
http://www.channelnewsasia.com/news/business/homeowners-hit-as-sibor/1712688.html
Yes. SIBOR higher as SOR comes off. Milk the loan fixings for as long as they can !
Oil prices coming off like hot pants now
definitely the result of USD.. not oversupply 🙂
Expect currency crisis to start soon.
When every central banks starts going off in different directions. With no more co-ordinated QEs efforts like now.
Haha. Good on you.
Hope it will not implode too badly on the innocent public.
http://time.com/3737506/low-oil-prices-reason/
Supporting your case !!