OCBC TREASURY RESEARCH
Daily Treasury Outlook
18 August 2021
Treasury Research & Strategy 1
Highlights
Global: Global risk appetite reigned in overnight by disappointing US retail sales data which slumped 1.1% mom in July, with core retail sales also down 0.7% mom. The S&P 500 snapped a 5-day rally to close down 0.71%, the biggest drop in a month, amid concerns that the Delta outbreak could curb the recovery process. VIX rose to 17.91. Fed’s Powell did not give much away at the townhall event beyond saying that Covid is still with us, so attention will now shift to the FOMC minutes due as well as the Jackson Hole symposium on 26-28 August for some clarity on the taper timeframe. UST bonds treaded water with the 10-year yield down slightly to 1.26%. Separately, flights have resumed at Kabul Airport after the Taliban pledged to build an inclusive government. Elsewhere. New Zealand went into lockdown due to the emergence of a suspected Delta variant case.
Market watch: Asian markets may range trade today ahead of RBNZ policy decision where a 25bp rate hike to 0.5% has already been priced in, but the extent of hawkishness may determine the rate trajectory from here. Today’s economic calendar comprises of Indonesia’s July trade data, UK’s CPI/RPI/PPI, Singapore’s COE premiums, HK’s unemployment rate, Eurozone’s CPI, and US’ housing starts and building permits. Fed’s Bullard is speaking and the FOMC minutes are also due.
US: The NAHB housing market index also retreated from 80 in July for a third month to a 13-month low of 75 in August amid high prices and rising costs due to material shortages.
EU:2Q21 GDP growth rose 2.0% qoq (13.6% yoy) compared to 1Q21 print of 2.0% qoq (13.7% yoy), while employment rebounded 0.5% (prior: -0.2% ) amid a revival of economic activities.
CN: Chinese President Xi Jinping stressed promoting common prosperity yesterday in chairing the 10th meeting of the Central Committee for Financial and Economic Affairs. The meeting also highlighted the importance to correctly deal with the relationship between efficiency and fairness. In addition, the meeting also called for coordinated efforts to prevent and defuse financial risks.
Oil: Brent fell a fourth consecutive session to close 0.7% lower at $69.03.
With the continued decline in crack spreads and flattening of the oil curve, it appears oil’s selloff may persist in the near future.
Equity Value % chg
S&P 500 4448.1 -0.7%
DJIA 35343 -0.8%
Nikkei 225 27424 -0.4%
SH Comp 3447.0 -2.0%
STI 3118.5 -0.9%
Hang Seng 25746 -1.7%
KLCI 1523.6 1.4%
Value % chg
DXY 93.130 0.5%
USDJPY 109.6 0.3%
EURUSD 1.1710 -0.6%
GBPUSD 1.3741 -0.8%
USDIDR 14373 0.0%
USDSGD 1.3624 0.5%
SGDMYR 3.1211 -0.1%
Value chg (bp)
2Y UST 0.21 0.41
10Y UST 1.26 -0.33
2Y SGS 0.34 -0.20
10Y SGS 1.36 -2.36
3M LIBOR 0.12 0.03
3M SIBOR 0.43 0.00
3M SOR 0.18 0.00
3M SORA 0.13 -0.10
3M SOFR 0.04 0.04
Value % chg
Brent 69.03 -0.7%
WTI 66.59 -1.0%
Gold 1786 -0.1%
Silver 23.66 -0.8%
Palladium 2491 -4.5%
Copper 9248 -2.1%
BCOM 93.99 -1.1%
Key Market Movements
Source: Bloomberg
OCBC TREASURY RESEARCH
Daily Treasury Outlook
18 August 2021
Treasury Research & Strategy 2
Major Markets
US: US equities logged their biggest loss in a month during yesterday’s trading session as retail sales fell below expectations. The S&P 500 fell 0.7%
while 10Y UST bond yields fell 0.33 bps to close at 1.26%. US retail sales fell 1.1% in July mom vs estimates of 0.3%. The data has reignited fears about the Delta variant of the Covid-19 virus slowing economic recovery. The new variant continues to weigh on risk sentiment and may pose further downside risk to the markets should it exacerbate.
HK: The quarantine period of tourists from “medium-risk” areas is raised from 7 days to 14 days while one new local Covid-19 case was recorded yesterday. This together with the sour market sentiments and China’s renewed regulatory risk hit Hong Kong’s stock market hard yesterday. As a result, USDHKD spot rose to the highest since Mar 2020 above 7.7900.
However, given the narrow US-HK yield differential while the US dollar has not yet reached its year-to-date high, any move of USDHKD spot beyond 7.80 is likely to be short-lived.
SG: The STI retreated 0.86% to close at 3118.51 yesterday and may continue to consolidate today. SGS bonds are likely to range trade ahead of the FOMC minutes while awaiting the issue size announcement for the 20- year SGS bond re-opening on 20 August.
Malaysia: Malaysia’s King reportedly met with the leaders of major political parties yesterday to select a new prime minister who can show the support of the parliamentary majority. MPs were told to submit their choice of a new prime minister to the palace by 4pm today, according to news reports.
The lawmakers were reminded to keep the contents of their declaration of support a secret until the king decides which MP commands the majority support.
Indonesia: Bank Indonesia has launched a cross-border QR payment linkage between Indonesia and Thailand yesterday. Under the linkage, consumers and merchants in both countries will be able to make and accept instant cross-border QR payment for goods and services. The connection is said to be the first that links the retail payment system operators in both countries and marks a milestone in the ASEAN Payment Connectivity Initiative.
OCBC TREASURY RESEARCH
Daily Treasury Outlook
18 August 2021
Treasury Research & Strategy 3
Bond Market Updates
Market Commentary: The SGD swap curve bull flattened yesterday, with shorter tenors trading 1bps lower, and belly and longer tenors trading 2- 3bps lower. There were heavy flows in SGD Corporates yesterday, with flows in MAPLSP 3.7%-PERPs, WINGTP 4.35%-PERPs, HRINTH 3.8%'25s, CS 5.675%-PERPs, and UOBSP 2.55%-PERPs. 10Y UST Yields fell 1 bps to 1.26%
after the release of lower-than-expected July retail sales data by the Census Bureau. Retail sales fell 1.1% in July, lower than the forecasted number of 0.3%.
New Issues: Anhui Transportation Holding Group Co. has arranged investor calls commencing 18 August for its proposed USD bond offering.
China Jianyin Investment Limited has arranged investor calls commencing August for its proposed USD bond offering.
OCBC TREASURY RESEARCH
Daily Treasury Outlook
18 August 2021
Treasury Research & Strategy 4
Equity and Commodity
Day Close % Change Day Close % Change Index Value Net change
DXY 93.130 0.54% USD-SGD 1.3624 0.49% DJIA 35,343.28 -282.12
USD-JPY 109.600 0.33% EUR-SGD 1.5953 -0.11% S&P 4,448.08 -31.63
EUR-USD 1.171 -0.58% JPY-SGD 1.2430 0.15% Nasdaq 14,656.18 -137.58
AUD-USD 0.725 -1.16% GBP-SGD 1.8720 -0.32% Nikkei 225 27,424.47 -98.72
GBP-USD 1.374 -0.78% AUD-SGD 0.9884 -0.64% STI 3,118.51 -27.01
USD-MYR 4.238 0.01% NZD-SGD 0.9426 -1.00% KLCI 1,523.59 20.69
USD-CNY 6.486 0.18% CHF-SGD 1.4890 0.20% JCI 6,087.91 -51.58
USD-IDR 14373 -0.10% SGD-MYR 3.1211 -0.08% Baltic Dry 3,566.00 63.00
USD-VND 22823 -0.04% SGD-CNY 4.7630 -0.30% VIX 17.91 1.79
Tenor EURIBOR Change Tenor USD Libor Change Tenor SGS (chg) UST (chg)
1M -0.5610 -0.57% O/N 0.0776 0.08% 2Y 0.34 (--) 0.21(--)
2M -0.3360 -0.34% 1M 0.0928 0.10% 5Y 0.77 (-0.01) 0.77 (+0.01)
3M -0.5520 -0.55% 2M 0.1066 0.11% 10Y 1.36 (-0.02) 1.26 (0)
6M -0.5280 -0.53% 3M 0.1243 0.12% 15Y 1.66 (-0.04) --
9M -0.1940 -0.20% 6M 0.1566 0.16% 20Y 1.75 (-0.03) --
12M -0.4960 -0.50% 12M 0.2388 0.24% 30Y 1.81 (-0.01) 1.93 (-0.01)
Meeting # of Hikes/Cuts Implied Rate Value Change
09/22/2021 -0.036 0.087 EURIBOR-OIS -6.62 (--)
11/03/2021 -0.037 0.087 TED 35.36 --
12/15/2021 -0.034 0.088
01/26/2022 -0.035 0.087
03/16/2022 -0.004 0.095 SOFR 0.05
05/04/2022 0.008 0.098
0.095 Foreign Exchange
Interbank Offer Rates (%) Government Bond Yields (%)
Fed Rate Hike Probability Financial Spread (bps)
Implied Rate Change 0.087 0.087 0.088
0.087 Secured Overnight Fin. Rate
0.098
Energy Futures % chg Soft Commodities Futures % chg
WTI (per barrel) 66.59 -1.04% Corn (per bushel) 5.583 -1.2%
Brent (per barrel) 69.03 -0.69% Soybean (per bushel) 13.690 -0.5%
Heating Oil (per gallon) 203.61 -0.60% Wheat (per bushel) 7.345 -3.4%
Gasoline (per gallon) 216.56 -1.60% Crude Palm Oil (MYR/MT) 46.350 -0.6%
Natural Gas (per MMBtu) 3.84 -2.76% Rubber (JPY/KG) 2.140 1.2%
Base Metals Futures % chg Precious Metals Futures % chg
Copper (per mt) 9247.50 -2.06% Gold (per oz) 1786.2 -0.1%
Nickel (per mt) 19193.00 -1.62% Silver (per oz) 23.7 -0.8%
Commodities Futures
Economic Calendar
Date Time Event Survey Actual Prior Revised
08/18/2021 07:50 JN Core Machine Orders MoM Jun -2.80% -1.50% 7.80% --
08/18/2021 07:50 JN Trade Balance Jul ¥196.4b ¥441.0b ¥383.2b ¥384.0b
08/18/2021 07:50 JN Core Machine Orders YoY Jun 15.60% 18.60% 12.20% --
08/18/2021 08:30 AU Westpac Leading Index MoM Jul -- -- -0.07% --
08/18/2021 10:00 NZ RBNZ Official Cash Rate Aug-18 0.50% -- 0.25% --
08/18/2021 14:00 UK CPI YoY Jul 2.30% -- 2.50% --
08/18/2021 14:00 UK CPI MoM Jul 0.20% -- 0.50% --
08/18/2021 14:00 UK CPI Core YoY Jul 2.00% -- 2.30% --
08/18/2021 14:00 UK RPI MoM Jul 0.30% -- 0.70% --
08/18/2021 16:30 HK Unemployment Rate SA Jul 5.30% -- 5.50% --
08/18/2021 17:00 EC CPI YoY Jul F 2.20% -- 1.90% --
08/18/2021 17:00 EC CPI MoM Jul F -0.10% -- -0.10% --
08/18/2021 19:00 US MBA Mortgage Applications Aug-13 -- -- 2.80% --
08/18/2021 20:30 CA CPI YoY Jul 3.40% -- 3.10% --
08/18/2021 20:30 US Housing Starts Jul 1600k -- 1643k --
08/18/2021 20:30 CA CPI NSA MoM Jul 0.30% -- 0.30% --
Source: Bloomberg
OCBC TREASURY RESEARCH
Daily Treasury Outlook
18 August 2021
Treasury Research & Strategy 5
Treasury Research & Strategy
Macro Research
Selena Ling
Head of Research & Strategy [email protected]
Tommy Xie Dongming Head of Greater China Research [email protected]
Wellian Wiranto Malaysia & Indonesia [email protected]
Howie Lee
Thailand & Commodities [email protected]
Carie Li
Hong Kong & Macau [email protected]
Herbert Wong Hong Kong & Macau [email protected]
FX/Rates Strategy
Frances Cheung Rates Strategist
Terence Wu FX Strategist
Credit Research
Andrew Wong Credit Research Analyst [email protected]
Ezien Hoo
Credit Research Analyst [email protected]
Wong Hong Wei Credit Research Analyst [email protected]
This publication is solely for information purposes only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without our prior written consent. This publication should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities/instruments mentioned herein. Any forecast on the economy, stock market, bond market and economic trends of the markets provided is not necessarily indicative of the future or likely performance of the securities/instruments. Whilst the information contained herein has been compiled from sources believed to be reliable and we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee and we make no representation as to its accuracy or completeness, and you should not act on it without first independently verifying its contents.
The securities/instruments mentioned in this publication may not be suitable for investment by all investors. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. This publication may cover a wide range of topics and is not intended to be a comprehensive study or to provide any recommendation or advice on personal investing or financial planning. Accordingly, they should not be relied on or treated as a substitute for specific advice concerning individual situations. Please seek advice from a financial adviser regarding the suitability of any investment product taking into account your specific investment objectives, financial situation or particular needs before you make a commitment to purchase the investment product. OCBC Bank, its related companies, their respective directors and/or employees (collectively
“Related Persons”) may or might have in the future interests in the investment products or the issuers mentioned herein. Such interests include effecting transactions in such investment products, and providing broking, investment banking and other financial services to such issuers. OCBC Bank and its Related Persons may also be related to, and receive fees from, providers of such investment products. There may be conflicts of interest between OCBC Bank, Bank of Singapore Limited, OCBC Investment Research Private Limited, OCBC Securities Private Limited or other members of the OCBC Group and any of the persons or entities mentioned in this report of which OCBC Bank and its analyst(s) are not aware due to OCBC Bank’s Chinese Wall arrangement.
This report is intended for your sole use and information. By accepting this report, you agree that you shall not share, communicate, distribute, deliver a copy of or otherwise disclose in any way all or any part of this report or any information contained herein (such report, part thereof and information, “Relevant Materials”) to any person or entity (including, without limitation, any overseas office, affiliate, parent entity, subsidiary entity or related entity) (any such person or entity, a
“Relevant Entity”) in breach of any law, rule, regulation, guidance or similar. In particular, you agree not to share, communicate, distribute, deliver or otherwise disclose any Relevant Materials to any Relevant Entity that is subject to the Markets in Financial Instruments Directive (2014/65/EU) (“MiFID”) and the EU’s Markets in Financial Instruments Regulation (600/2014) (“MiFIR”) (together referred to as “MiFID II”), or any part thereof, as implemented in any jurisdiction. No member of the OCBC Group shall be liable or responsible for the compliance by you or any Relevant Entity with any law, rule, regulation, guidance or similar (including, without limitation, MiFID II, as implemented in any jurisdiction).
Co.Reg.no.:193200032W
