Singapore’s bond demand feared to shrink after Fed’s hawkish comments

Investors would want to minimise risks.

The two-year Singapore government securities auction will be closing on August 29 and may nip a large demand barring possible impact by hawkish comments from the US Federal Reserve.

DBS Group Research fears demand may be eroded following US Federal Reserve Chair Janet Yellen’s hawkish language during her speech at Jackson Hole.

“A hawkish Fed may temporarily dampen demand for two-year Singapore government securities as investors either head to the very front of the curve, minimising duration risks, or to the back of the curve where the yield pickup over comparable US Treasuries is still sizable,” DBS Group Research explained.

Notably, the net issuance size is $2 billion, compared to a Singapore government securities maturity amount of $7.7 billion on September 1, DBS Group Research said.

Two-year to five-year Singapore government securities, whose yields are trading below the fitted curve, may be more vulnerable to a Fed re-pricing, it added.