SGD Rates Weekly : The Advi-SOR


1 month 0.174%
3 month 0.2668%
6 month 0.39735%

FEB CPI MoM 0.1%, expected 0.3%
FEB CPI YoY -0.3%, expected -0.2%
FEB Core CPI 1.3%, expected 1.2%

CPI falls for 4th consecutive month, the longest stretch since 2009, yesterday for the 6M SOR to fix at its highest in 5 years at 1.29498% yesterday along with 6 year highs in 1M-6M SIBOR.

USDSGD has pulled back to its range within the NEER band which would be comforting if not for the higher short end rates again, ominously signalling that perhaps this fx move is temporary as I see banks urging customers to stick to their long USD trade like good little lambs.

Well, Asians will have to go with the global flow and the USD Index which is all about the EUR and that is a toss up between the Fed and Greece and oil prices etc.

We are heading into the final leg of the quarter and month end is around the corner, Singapore observing a week long mourning period for the passing of founding father, Lee Kuan Yew.

Thus it would be reasonable to expect that we shall have some peace in the days ahead and after last night’s correction in the USD, the 6M SOR fixing is pointing lower today, by some 7bp as I see 1.22% at the moment.

We shall have a bond reopening auction this Friday for the SGS 2.75% 07/2023 bond, currently going at 2.32% yield, still around its 6 month high and it is worthwhile noting that its lifetime lowest yield (since its auction in Jun 2013) was 1.78% back in just Jan this year. (*ATM applications should close soon ie before Fri)

Like I mentioned last week, there is an anomaly between SGS and SGD corporate credits. This has allowed some insane high prices to be maintained in corporate bond space, prices that are not traded and has allowed companies like CDL to issue a 5 year paper at the tightest ever I have seen since the crisis, at 0.79% for 5 years.

I still believe that we shall see a renaissance in the SGS in the weeks ahead as we head into the April semi annual Monetary Policy Review that is expected between 10-14 April.

The spread between the 10Y SGS and 10Y US treasury is at its widest since 1998 which makes a good case for carry, noting that 22 countries in Europe are in deflation and 70% of developed markets have inflation less than 0.5%.

It still depends on the USD and the Fed but signs are looking encouraging as daily volatility in the USDSGD looks like it is falling at last and for more range trading in the week ahead (which means SIBOR should be better contained).




Good luck.