SGD Monthly Snapshot : Wake Me Up When September Ends



Economic Data in September

2 Sep
Aug PMI 49.8 vs 49.4 expected
Aug Electronics Sector Index 50.2  vs 49.7 previous

5 Sep
Aug Nikkei Singapore PMI 52.3 v 50.7 previous

7 Sep
Aug Foreign Reserves $252.28 bio vs $251.43 bio previous

15 Sep
Jul Retail Sales +1.4% MoM vs -0.4% expected
Jul Retail Sales +2.8% YoY vs +1.4% expected
Jul Retail Sales ex Auto -3.1% vs -2.8% expected

16 Sep
Aug Non-oil Domestic Exports 0.0% YoY vs -3.3% expected
Aug Non-oil Domestic Exports -1.9% MoM vs -3.1% expected
Aug Electronics Exports -6% YoY vs -12.9% previous

23 Sep
Aug CPI +0.5% MoM vs +0.4% expected
Aug CPI -0.3% YoY vs -0.4% expected
Aug Core CPI+1% YoY vs +1.1% expected

26 Sep
Aug Industrial Production +0.1% YoY vs +0.5% expected
Aug Industrial Production 0.0% MoM vs +1.8% expected


A “screwed up” August goes into a mind numbing September, confronted by the BoJ and the Fed, US Presidential debates and Deutsche bank.

Nevermind the bad news dominating headlines, lowest home prices or slowest loan growth as the body count for defaulting local companies rise and MAS Helpdesk becomes an auto suggestion on Google search.

SGD Monthly Snapshot : American Idiot, Wake Me Up When September Ends


Dated 3rd October
SGD Monthly Snapshot : American Idiot, Wake Me Up When September Ends 1

SGD forward pips were decimated in September , driving SOR fixings  to a 12 mth low even as USD demand drove 6M SGD fwds lows not seen since 2012, in the sharpest decline we have seen in a long time which is nothing compared to JPY fwds, of course.


SGD Monthly Snapshot : American Idiot, Wake Me Up When September Ends 2


Yet the USDSGD cross currency basis have tightened on the month. Therein lies the anomaly which does not suggest a protracted period of USD demand which could as well be, as counter intuitive as it sounds, the precursor to a period of USD strength in the days ahead as positions unwind in the overdone fwds market.

The huge bear steepening we saw in the IRS curve, led by the lower SOR fixings, was matched by a bull flattening of the SGS curve which is too unhealthy to think too much into, with the new 20Y SGS (Aug 2036) outperforming, along with the best performing bond of the year, the 30Y (Mar 2046). That was until 3 Oct when the MAS decided to announce a mini auction for the reopening of the 30Y on 27 Oct which prompted a 10 bp yield correction overnight and further curve steepening.

Nonetheless, there has been big profits in the >5Y bond swap spreads (and long bonds) as bonds benefited from the smaller than expected 5Y bond auction on 1 Oct, after the $7.7 bio of maturity on 1 Sept.

With some folks crying foul over MAS’s perceived “yield curve targeting” move in the surprise auction of a long end bond when it was safe to assume that there would be no more supply of long end papers for the rest of the year (and for a while), we should have enough faith in market appetite to stomach the maximum auction size of $ 1 bio (at the right price) and a flat curve is unhealthy for bank profits.


We have put forth the steepening idea and the USDSGD at 1.38 trade last month (not so sure where fwds will head). September has been a slow crawl to the targets but the picture is getting clearer as we head into October and the MAS MPC due next week where an “unchanged” stance is the overwhelming expectation which would be in line with the rest of the central banks especially when fiscal policies are now the hugely anticipated flavor.

Likewise we believe so as well because there is no impetus for any action of any sort that would make a difference before the US presidentials, global political uncertainties, Dec FOMC and the Brexit coming up in March next year.

Thus it would make sense to continue to ride the steepening trend, avoiding the short end which may be affected by the fwds and also, stick to the USDSGD trade although we believe that the SGDCNH is a better sell as a hedge, along with the CNY’s SDR status. And lastly, say nothing for the bonds because they have come a long way and like we said last month, “The 30Y bond does deserve to be the crowned the best “Quick Buck” bond on record, currently returning 14%, less than 6 months from issuance as price woes continue to bite local corporate bond investors.” It is about 12% now !

It is October and time to wake up ! Leaving with Greenday’s awesome video.