SINGAPORE RATES WEEKLY : S.O.S., SAVE OUR SIBOR !

It’s been a  bad week for Asian currencies on the CNY rate cut and the currency that was unaffected by the rate cut ? CNY, of course !

Wow. China cuts rates and ASIAN currencies suffer for her sake ! The NZD, KRW, THB, INR and gang all losing out to the USD and hearing talk in the market of Bank Indonesia and Bank of Thailand buying their bonds in the market to stem losses.

Makes sense along with the IMF commenting last week that “ASIA SHOULD KEEP FX INTERVENTION OPTION AGAINST VOLATILITY: IMF“,  going back to the Middle Ages again ?

1M LIBOR 0.18475 (12 MTH HIGH)
3M LIBOR 0.27985 (24 MTH HIGH)
6M LIBOR 0.41425

SINGAPORE ECONOMIC DATA

APR PURCHASING MANAGERS INDEX 49.4 vs expected 49.5
APR ELECTRONICS SECTOR INDEX 49.1 vs expected 50
* anything under 50 is contractionary

APR Foreign Reserves $251.92 Bio (+2.47 Bio)
* first increase since Jun 2014

Singapore govies have not been shunted from the global sell off, the 10Y bond yield up 0.4% from a month ago. Yet our currency has not weakened, still holding at 0% from the mid of the SGD NEER and SOR fixings have come off even though the IRS has paid up, fattening those bond swap spreads. Puzzling indeed.

 

Taking off the bond and fx bets last week would have paid off for those who had https://tradehaven.net/market/fx/singapore-rates-weekly/. Unfortunately, I do not think there is a trend in sight at the moment and whilst I love the 10Y SGS at 2.5% to give CPF a fair fight, there is still some capitulation to await before the waters look safe enough to take a dip in.

Furthermore, I am highly skeptical of the rally we are seeing in the HY world that is supposedly on recovery mode for all the junk property and oil related companies on the oil price recovery and the Chinese rate cut.

I am particularly concerned that the rhetoric has been slowly but surely swinging back to a EU recovery which is a bad sign for Asia as far as the investment dollar goes, coupled with the Chinese slowdown that bogs down the Asian growth engine.

Thus the outflows are unlikely to abate with poor India hit hard in the past week.

It would pay to sit out or on the side of the West at the moment from a trading point of view although with the SOR at these levels, we could revisit some curve steepening.

I did my little homemade analysis on the Singapore Savings Bonds that we got more details about yesterday. https://tradehaven.net/market/singapore-savings-bonds-comparison-thoughts-and-implications/

The main takeaway would not be the impact on the banks’ balance sheets because the overall issuance is only $2-4 bio per annum, yet it will cause a revolution in the mindsets of the people and our SIBOR !

We see banks rushing out now to give Corningware sets away for $50k fixed deposits that pay 1.8% per annum for 2 years.

Corningware set = compensation for loss of credit quality (bank credit vs Govt of Singapore credit) ? Noting that $50k is covered by the deposit insurance scheme.

I will have more to say in the days ahead, I am sure.

Good luck !