SGD Bumper Election Issue : Lucky Singapore Savers

I say again, thank goodness for the elections.

It has been an ugly week and the effect of the elections on the USDSGD lasted about half a day.

While reports are screaming that we should be worrying about that 1.45 for the USDSGD, we appear to have hit a level of resistance at 1.4150-1.42.

To break that level, we would need to see further capitulation in risk and today is a good test as we had US equities close their worst month since 2012.

Today I shall put things in perspective given the 6 year highs in parts of the SGD curve and given that this is the bumper issue (no SGD Weekly next week or perhaps in the near term).

Table of SGD Rates (note that the data for the bonds do not go back past 2001 and the 20Y-30Y only came about in the past decade and the

New 6 year highs in short end bonds and rates, some of them struck today !

For the week, bonds saw a nasty sell off after the 15Y auction (cut off 3.05% no tail, current 3.15%) which is quite unexpected given that it is the last long dated bond we shall see supply of in a while. Perhaps to do with the bumper 1.2 bio LTA 7Y (issued 2.57%, current 2.83%) and 12Y (issued 3.09%, current 3.28%) issues earlier last week which took up some market slack and the curve flattening which does not give the long end bonds a whole lot of yield buffer.

 

Economic Releases

Jul Industrial Production +1% MoM, expected +2.3%
Jul Industrial Production -6.1% YoY, expected -4%

The good news is that we shall have the Singapore Savings Bonds coming at yield levels not seen in 5 years and our CPF ordinary accounts are going to get a rate revision because 2.5% is just too low.

• Note that investors can start applying for the Singapore Savings Bonds from this month. http://www.sgs.gov.sg/savingsbonds/Your-SSB/This-months-bond.aspx
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My Thoughts

These are not normal times because we have not seen Singapore yields hold above Australia and the US for such a protracted period which has made me uncomfortable since April and the gap has continued to widen which goes to show what the market thinks as we widen to Asian Crisis levels which is as far as record keeping goes. Yet it is comforting to see the buffer we have built, don’t you think ?

 

I had expected more stimulus and have been wrong, so far, and after MAS’s expectations for a “sort of” lost decade till 2026, it does look like it will be a long haul affair and Singapore markets look more EM than ever with both stocks, bonds and forex selling off.

 

All I can say is that the window period is small for crises or meltdowns before the long road to recovery begins. It would take a lot more to capitulate in these times of infinite QE than it would have in the past and while the situation is really out of hand at the moment, tied heavily to the fate of global markets, it would do well to keep a clear and rational head and sniff out the bargains that only crises offer, not forgetting the elections next week.

The elections. What can I say ?

Best results during a crisis ?

Markets do not think so, if we look at the bonds, forex and equities which are pricing in the alarming fact that every single ward would be contested. But the word from the ground is that we could be seeing a better result than the last round.

Who would be right ?

Have a good fortnight !