SINGAPORE RATES WEEKLY : IS THERE A PROBLEM ?

US LIBOR
1M 0.1884
3M 0.2843
6M 0.448

ECONOMIC NEWS AND DATA

JUN PMI 50.4, expected 50.2
JUN Electronics Sector Index 50.3, previous 49.8
JUN Markit PMI 51.1, previous 49.5

The SGD managed to hold its ground through the turmoil of last week, crashing China and the Greferendum, which has now become a Gr-imbo (Greek Limbo).

The big news would be the delay of the Manulife US Reit IPO that was announced yesterday which would have been the biggest IPO that the country has seen in the past 12 months, seeking to raise S$569 mio after a dry year we had so far with only S$ 50 mio this year.

As far as I can see, regional and global uncertainties continue to plague local market sentiments, looking no further than the political spat in Malaysia and the growing rift in the ranks of the ruling party.

All this has served bonds well with yields unchanged to 13 bp lower, curve steepening while interest rates remain unchanged. Against the region, SGD bonds underperformed with big rallies seen in Indonesia, India, China, NZ and Australia.

Is there a problem ?

Yes. There is just an utter lack of interest in Singapore markets because stable markets with little growth stories are just too boring for investors who may as well put their money to work in the more widely followed and traded G3 markets or throw their lot into those emerging economies that are in sore need of reforms but which present better opportunities for speculation.

Yet Singapore shall remain the region’s safe haven in the next EM capitulation that occurs on a regular basis and I suspect shall be the next item on the trading agenda once Greece is sorted.

Despite the expectation of a potential weakening of the SGD into the MAS meeting in October, I would see the USDSGD keeping at her current levels for the time being even when we have the USDMYR making new post-peg highs daily, the AUDUSD at 6 year lows and the USDIDR at levels not seen since 1998.

I am not sure if the short end bond rally is due to foreign safe haven interest more than it is due to the fact that we saw a S$ 6.3 bio maturity on 1 July which was only partially replaced by the new S$ 2.8 bio 5Y bond that has rallied 8 bp since its auction.

I did expect that bonds would rally into the second half opening of 2015 but was expecting a little more than sluggish performance we saw in the past week. Perhaps into next week ?  for just another 5-10 bp hopefully ? (NB : does not apply to credits !)

Meanwhile I am still expecting some stimulus package to be announced in time for the SG50 celebration perhaps after the 2Q15 GDP numbers next Tuesday, 14 July.

Last week, MAS made an announcement on removing the ACU-DBU segregation for banking operations in Singapore along with several skill and talent development initiatives for financial sector. All look promising with little market impact.

With that, I guess we can all go back to the Hang Seng China Enterprise Index channel on our screens.

Good luck !