1M 0.184
3M 0.28375
6M 0.42465

We are seeing a significant drop in bank loans, down 1% from last month which is biggest drop we have had in years after ballooning by more than double since 2007. This beats the sharp fall we saw in Nov 2008 in the heart of the crisis.

Nonetheless, it should not be taken as a sign of a major slow down or anything like that, for it has only been just 3 months of declines (in 2008, loans shrank for 4 months running) although we have been registering 0 to negative growth since its peak last Nov.

For the week, bond prices weakened after the 10 year bond auction last week that failed to rally much off its issue price of 99.603 (2.42% cut off on a short tail). Markets were over enthusiastic and pushed for a tiny tail which left little room for profits.

USDSGD is trading at its 7 week high since its precipitous decline after the April MPS and we are back to Jan 2015 levels.

sgd weekly

USDSGD weekly candlesticks


I think we have seen the highs for the first half of 2015 with Sibor and SOR to remain nicely contained from here and the SGD to drift within mid NEER. In addition, I believe the markets are better prepared to cope with the new ranges and hear that banks have put in some “measures” to prevent sudden run-ups even if nobody is prepared to bet on lower rates.

Bond price action makes me slightly uncomfortable still, noting a big dip in 3 year prices which makes sense given that funding costs have not eased off enough, with 1 year rates holding above 1% and looking comfortably settled.

It is hard to be bullish as such and I will remain neutral at this rate, loan growth slowing which may or may not be a sign of a sluggish economy and higher oil prices which should be good for inflation – both conflicting on the currency and interest rate front.

Happy full moon !