SINGAPORE RATES WEEKLY : "SOR" The COE ?

 

FEB Retail Sales Ex Auto  +14.8% YoY
FEB Retail Sales +15.8%  YoY vs expected +3%
FEB Retail Sales -3.3% MoM
MAR Electronic Exports +10.4% YoY vs expected +2%
MAR Non Oil Domestic Exports +18.5% YoY vs expected -1.1%

Good news on COE quota which is set to explode in the next 3 months and blasted all over every single news media they can lay their hands on.

Bad news because that could be DEFLATIONARY (i.e. higher interest rates again) as the SGD could be subject to weakening pressure ?

SGS TABLE

1M Libor 0.18025
3M Libor 0.27575
6M Libor 0.4029

SOR fixings eased off to 6 week lows late last week and SIBOR followed to fall under their 5 week lows. The anomaly of higher SIBOR rates remains.

Those who noted along with me that the yields and rates were almost “there” earlier last week, missed the sell off as the market saw profit taking in the bonds later in the week, driven down by probably the same invisible hand that drove their prices up before the last quarter end. Nice going on market control ! And I had thought Singapore bond prices would be better supported than for them to be tracking Euro periphery yields out of Portugal and gang.

Nonetheless, congratulations to those who had managed to grab some USDSGD under 1.35 as we head into CPI numbers this Thursday (130 pm), to be followed by Industrial Production numbers on Friday (1pm).

At the rate the rest of the NEER basket are heading, SGD is doing well to stick to its current levels. Should the inflation print come out less than the 0.2% MoM increase the market is expecting, we should see a small rally (1.3625 ? with everything else at current levels). Yes, a small one because the next MPS is in October and the markets have bigger fish to fry in Europe, Australia and UK in the meantime.

Besides, I think we better watch what we say these days because MAS came out with a very public announcement last week that FOREIGN RESERVES ARE INTACT and WITH THE GIC THESE DAYS ! And that there has been  little intervention at most. http://www.straitstimes.com/news/business/economy/story/official-foreign-reserves-not-being-drawn-down-support-singdollar-mas-20

I personally do not understand much about accounting and translation “effects” (note the word is EFFECT not loss) but I guess it could mean they had bought more EUR than usual in the past year ?

The bond sell down seems almost unjustified but there is really no strong impetus to buy anything especially when SOR and SIBOR have collapsed so much as to imply a potential base and may rise from here.

With the world heading into a cliffhanger in Greece, I suppose we should be thankful that our COEs will come cheaper – NOT ! Not when STI broke its 6 year high last week ! which means the car showrooms or showflats will be packed again !

And finally, be thankful that we are sitting through the hottest months in modern history (Mar was the hottest but April is not over yet) without any haze !

Good luck !