Singaporean bonds gain as growth declines, inflation remains in negative

The Singaporean government bonds gained on Thursday following weak economic data in the past few days, creating pressure on the central bank for a further policy easing in the wake of lacklustre global demand and Brexit turmoil.

The 10-year bonds yield, which moves inversely to its price fell, nearly 5 basis points to 1.755 percent, the yield on super long 20-year note also dipped nearly 5 basis points to 2.215 percent and the short-term 2-year bonds yield slid 2-1/2 basis point to 0.965 percent by 06:30 GMT.

The unemployment in Singapore during the second quarter rose, following weak global economy that dampened hiring across the nation. The seasonally adjusted unemployment rate in Singapore went up to 2.1 percent in June this year, a slight increase from the 1.9 percent in March, preliminary data released by the Ministry of Manpower (MOM) showed Thursday.

Moreover, Singapore’s industrial production during the month of June fell, following weakness in the pharmaceuticals and petrochemicals sectors. Also sharp falls in marine and offshore engineering output led the decline.

Industrial production fell 0.3 percent from a year earlier in June, data released by the Singapore Economic Development Board showed Tuesday. On a seasonally adjusted month-on-month basis, manufacturing output decreased 2.5 per cent last month from May. The decline in June was almost in line with expectations, with a Reuters poll of 10 economists who gave a median estimate of 0.2 percent y/y and 2.5 percent m/m decline in manufacturing output. Moreover, the fall in June marked the first drop in output since February 2016.

In addition, consumer prices in Singapore in June remained in negative territory, although higher than what the markets had expected as the continuing drag from housing and utilities have subsided following easing out of the effects of government rebate in services and conservancy charges.

Singapore’ headline inflation registered -0.7 percent y/y in June, up from -1.6 percent in the previous month. Prices of housing and utilities registered -4.2 percent in June compared to -6.4 percent in May. More importantly, transport inflation has picked up to -4.3 percent y/y, from -5.7 percent in the previous month.

Lastly, the second quarter GDP rose 0.8 percent q/q, against market expectations of 0.9 percent growth, from 0.2 percent in the first quarter of 2016. This modest growth is majorly driven by the fallout of UK from the European Union last month.

On an annual basis, it also inched modestly 2.2 percent y/y, the consensus was for 2.1 percent y/y, as compared to prior 2.1 percent.

Meanwhile, The Straits Times Index (STI) traded down 0.89 percent at 2,915.28 points by 06:00 GMT.