SINGAPORE RATES WEEKLY : SG50 FOR YOU AND ME AND OUR NEW WEBSITE

Welcome to the new look Tradehaven website.

It took slightly longer than we had anticipated and has been quite a lesson in learning that none of us are terribly good at design work, with rather poor eyes for details but we are extremely lucky to have gifted friends around.

Therefore, we are pleased share this monumental achievement of ours, that we have come to after 3 years. A new site, complete with a working forum and bond directory that will be uploaded weekly. The forum will definitely come in handy for new issue announcements, short blasts and updates as well as facilitate those long drawn discussions besides a bit of fun in the lifestyle sections.

There will be bugs abound and we would appreciate as much feedback as you would volunteer, for us to fix things in the next few days so do not hold back, please, and complain away, Singapore style !

Finally, a big thank you to all readers and supporters who have grown up with us. It has been a big adventure as we aim to continue to reach out to readers to be part of our investor network for mutual exchange, discussions and friendship, even as we still do not know where all this will take us but we hope that we shall enjoy the ride together !

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Now what do we have this morning after our long weekend break in Singapore ?

Singapore economic growth at a 3 year low and China devaluing her currency by nearly 2%, blindsiding the entire market (which was expecting a rate cut).

(Bloomberg) — Singapore slashed the upper end of its growth forecast for 2015 after the economy shrank last quarter, signaling a softened outlook even as the government prepares for a general election. The currency slipped to its lowest in five years.
The growth forecast is now 2 percent to 2.5 percent this year, from 2 percent to 4 percent previously, the trade ministry said in a statement Tuesday. Gross domestic product fell an annualized 4 percent in the three months through June from the previous quarter, when it grew a revised 4.1 percent. That compares with an initial estimate for a 4.6 percent drop, which was also the median in a Bloomberg survey.

“China Devalues Yuan by Most in Two Decades to Combat Slowdown

China lowers yuan reference rate by 1.9%, most on record; PBOC says today’s fixing is one-off adjustment, and it will improve pricing mechanism for fixing, says effective FX rate stronger than other currencies; seeks open CNY market to qualified overseas institutions; vows to converge onshore, offshore yuan exchange rates; nation’s aggregate financing came in at 718.8b yuan ($116b) in July; July new loans at 1.48t yuan versus estimate of 750b yuan.http://www.bloomberg.com/news/articles/2015-08-11/china-weakens-yuan-reference-rate-by-record-1-9-amid-slowdown

 

SINGAPORE RATES WEEKLY : SG50 FOR YOU AND ME AND OUR NEW WEBSITE 1

 

Looks like our 1.40 USDSGD reality is within reach today as we sit at 1.3991 (5 year high) as I type away.

That does gel with the secular stagnation story that we have been writing about which is more or less ratified in MAS’s MD Ravi Menon’s speech last week which paints a picture of slightly uncomfortable economic restructuring between 2011-2025 (another 10 years left). http://www.mas.gov.sg/News-and-Publications/Speeches-and-Monetary-Policy-Statements/Speeches/2015/An-Economic-History-of-Singapore.aspx

It does look like we are in uncharted waters here, not just for Singapore but for global markets with this unprecedented central bank divergence on policy stances, as the Fed prepares for their first rate hike after the longest lull in history.

SINGAPORE RATES WEEKLY : SG50 FOR YOU AND ME AND OUR NEW WEBSITE 2

US FED FUNDS RATE UNCHANGED FOR THE LONGEST PERIOD

 

Like I said about preparing to be unprepared, which is the opposite of expecting the unexpected, the main takeaway is that sentiments are souring everywhere except for the mature economies of the G3 which cannot really be counted on to pull the rest of the world out of a slowdown and China is out to prove that by timing their devaluation a few weeks ahead of the Fed.

There is every chance we shall see 1.40 go for the USDSGD in the next few days, depending on how much panic the speculators can sow in the marketplace which is not hard because they have the economic outlook on their side. Thus 1.41, here we come ? Hold on …..
“MAS Loh: Singapore Central Bank’s Policy Stance Remains Appropriate”

SINGAPORE RATES WEEKLY : SG50 FOR YOU AND ME AND OUR NEW WEBSITE 3

USDSGD weekly candlestick chart

 

Curve flattening has played out well but I doubt we shall see the 5 year low of 0.88% in the e.g. 2-10Y spread that we saw earlier in March (we are currently at 1.13 % now).

SINGAPORE RATES WEEKLY : SG50 FOR YOU AND ME AND OUR NEW WEBSITE 4

SGD 2Y VS 10Y IRS SPREAD

 

Secular stagnation, as its name suggests, is temporal and the long ends do not look terribly attractive from a carry point of view relative to the 4-5Y belly, high yield credits excluded and not yet thinking of the 15Y bond re-opening this month end.

For Singapore, we shall have the distraction of an election with a record breaking 11 opposition parties this round, to talk about extreme behaviour. What can I say, prepare to be unprepared ?