Upcoming $2.6b SGS auction one of the largest on record: analysts

Will it be snapped up by investors?

Today's 10-year Singapore Government Securities (SGS) bond auction is one of the largest auction size on record, but the massive supply is expected to be well-received by investors.

Victor Yong of UOB noted that today's auction size is only marginally smaller than the $2.7b of June 2021 bonds which was offered in 2011.

“Although size matters, the environmental factors matters more.Although size matters, the environmental factors matters more. For the auction itself, we are fairly confident that the inelastic nature of demand for a new benchmark bond will ensure an uncontroversial take down of the 10Y SGS auction,” Yong noted.

He added that bidding yield dispersion will be bookended by resistance between 2.45% to 2.50% and support at prevailing levels since investors are unlikely to aggressively chase an overweight position at the auction whilst the completeness of global term premium re-pricing process remains unresolved.

“In terms of post auction performance, richening potential is limited by static demand trend as well as the aforementioned term premium process. The possibility of post auction indifference to the 10Y SGS could mean better yields for those with opportunistic demand,” he said.