Singapore Rates Strategy: Standard Chartered Bank

Maintain Neutral duration stance

• We remain Neutral on Singapore Government Securities (SGS). We expect the MAS to ease policy by lowering the midpoint of the SGD NEER policy band. 
  
  
• We expect the yield to spike on the day of the easing announcement. However, we think this will be temporary and that volatility will quickly return to the normal range. 
  
  
• We still expect the yield to rise gradually and the curve to flatten towards year-end as the US Fed begins its rate normalisation.

We revise up our SGD rates forecast

• Based on our MAS easing scenario and better-than-expected US job data, we revise up our SGD rates forecast. We expect SOR and 2Y SGD rates to move gradually higher after a sharp initial rise. 
  
  
• We also expect the MAS to maintain its gradual appreciation policy and USD LIBOR to rise slowly. 
  
  
• Given our call for a downward recentring by the MAS, we expect the SOR and short-end IRS to rise initially and the curve to flatten. 
  
  
• We close our US Treasury (UST)/SGS spread widener, given the expected stronger impact of MAS easing relative to Fed rate normalisation in the short term.