SINGAPORE RATES WEEKLY : FIERCE MARKETS

SGS TABLE

US Libor
1M 0.183
3M 0.2812
6M 0.4239

Singapore Economic Data

2 Jun May PMI 50.2 vs expected 49.3
2 Jun May Electronics Sector Index 49.8 vs expected 49.5
8 Jun May Foreign Reserves $250.19 bio vs April $251.9 bio

The largest 1 weekly move in 10Y SGS yields since 2013 where we saw +0.25% in a week.  This contrasts the 2 largest weekly gains (in 3 years) made in 2 consecutive weeks back in Jan this year totaling -0.47%. Now tell me is that the meaning of volatility ?

At 5 year highs for the 4 and 5 year interest rates, I think we should look outside to see what is happening.

Global bond yields are all higher on the week but EM Asia remains the big underperformer in both currencies and bonds. Indonesia saw some major outflows as their bonds saw some 0.5% moves higher in yields. The MYR is at a 9 year high against the USD and the IDR has not been this weak since 1998.

And the better China holds out, the worse Asia performs as fund continue to divert into the MSCI story which means that China will see a huge re-weighting at the expense of everyone else and her Asian proxies.

This also comes at a time when Chinese growth is looking suspect that will be a big drag on the region as US and Europe rebound.

With USDSGD breaking a 2 month high this week, only saved by Obama’s comment last night that the USD looked too strong, I still believe that we have seen the highs for the year so far. (Note that SGD is holding unchanged against the NEER basket)

I have always liked the 10Y SGS above 2.5% because that means we shall see higher Ordinary Account rates for our CPF (ughhh, for my CPF tied up in my property).

The only thing that makes me uncomfortable would be this chart.

10Y SGS vs 10Y UST

10Y SGS vs 10Y UST

Never since September 1998, has the SGS ever underperformed UST and never has the SGS underperformed in such a sustained period which does not bode well for bonds going ahead.

The good news is that we will not be having a long end issue till August where we will have a 15Y  re-opening. End June, we shall see a new 5 year benchmark.

I think this is a good time to take a look at those corporate bonds that are in the money to take some profits and switch into government bonds that have caught up in yield terms. That option would come off as much more palatable in portfolio terms.

Wishing everyone a nice week ahead.