SINGAPORE RATES WEEKLY : CONSOR-LIDATING

Economic Data

Mar Retail Sales +1.1% MoM
Mar Retail Sales +2.1% YoY versus expectations of +3.3%
Mar Retail Sales Ex Auto -3.2% YoY

Apr Non Oil Domestic Exports +2.2% YoY versus expectations -5%
Apr Non Oil Domestic Exports -8.7% MoM versus expectations -14.4%
Apr Electronic Exports -3.8% YoY versus expectations -6.7%

We have the final 1Q15 GDP numbers coming up in the next 7 days and we are expecting to beat the previous estimate which should bode well for the SGD dollar which has been trading strongly against the NEER basket.

SGS TABLE
1M USD LIBOR 0.1862 % (12M HIGH)
3M USD LIBOR 0.2765%
6M USD LIBOR 0.41275%

A steepening week for the SG curve with the front end coming off hard as SOR and SIBOR fixing at 3 month lows and 9 week lows respectively which was a good excuse to buy some government bonds again in a rally that erased the losses of the prior week and added some decent gains.

Corporate issuance has been brisk as well with banks eager to bring out bonds that have been put on the back burner during that entire SIBOR spike episode that set demand on the sidelines.

This all looks good for investor confidence in the backdrop of all the retail bonds and Singapore Savings Bonds announcements and is timely because we really do not want investors witnessing a market collapse just as they are considering investing in bonds !

Thus we nearly back to where we were when we started the year except for the short end which remains 0.15-0.4% higher.

sgs curve

It would be hard to imagine funding costs coming off further from here for the time being given the lack of stimulatory initiative coming from the only 4 central banks that matter to the markets – FED, BOJ, ECB and PBOC. Thus, a period of consolidation should be expected.

Do note that we shall have a new 10 year SGS auction this month end, 27 May, which would be the first new issue of 2015 because the rest so far have been re-openings. We should be expect the announcement tomorrow, so get those ATM cards out if 2.36% (using current prices to project) for 10 years look good to you.

USDSGD does not look able to sustain under 1.32 which would make that its current support level and it has been 10 weeks since its peak at 1.39 which coincided with the highs in SOR and SIBOR.

That said, we have spent about a month in consolidation or some form of it, between 1.31-1.34 and if you ask me, I would not dare hope to see the 1.2’s days again.

sgd weeklyUSDSGD Weekly Candlestick Chart

Good luck !