Implied yield on US 10-Year treasury futures trading below 1per cent for first time

Read? Implied yield on US 10-Year treasury futures trading below 1per cent for first time


The implied yield on U.S. 10-Year Treasury futures traded below 1 per cent for the first time, as investors grew increasingly unnerved by the spread of coronavirus.


NEW YORK: The implied yield on U.S. 10-Year Treasury futures traded below 1per cent for the first time, as investors grew increasingly unnerved by the spread of coronavirus.

Treasury futures jumped at the open of trading on Sunday night as investors took little solace from weekend comments by U.S. officials that aimed to soothe panic about a pandemic.
Stock futures opened lower. Stock markets plunged last week, with an index of global stocks setting its largest weekly fall since the 2008 financial crisis, and more than US$5 trillion wiped off the value of stocks worldwide.

Money continued to pour into U.S. Treasuries as worries have increased about the global spread of the virus. At one point on Friday afternoon the 10-year yield reached 1.1159 per cent, marking a record low for the fourth consecutive day, after comments by Federal Reserve Chair Jerome Powell cast doubt on whether the U.S. central bank would act quickly on rates. The movement also steepened the portion of the U.S. Treasury yield curve.

"Treasuries are overbought but may stay low due to a slowdown but will spur a wave of refi’s and home sales," said John Lekas, CEO and Senior Portfolio Manager at Leader Capital.

Markets are now looking to central banks for aid in quelling the panic.


Goldman Sachs economists on Sunday predicted the U.S. Federal Reserve will cut interest rates aggressively and perhaps before its next scheduled meeting in two weeks time, saying the head of the U.S. central bank sent a clear signal with his unscheduled statement on Friday.

(Reporting by Megan Davies and Dan Burns; Editing by Daniel Wallis)


Source: Reuters

Pimco Total Return Fund posts record outflows of US$9.6b

[NEW YORK] Pimco Total Return, the world's largest bond fund, suffered record large outflows in June, in a second straight month of withdrawals amid carnage in the bond market that have reduced the fund's assets by 8.5 per cent, data from Morningstar showed on Tuesday.

In June, investors pulled US$9.6 billion from the fund, which is managed by Bill Gross and is the flagship fund of Pacific Investment Management Co It was the fund's largest single month of outflows since Morningstar records began in 1993, the investment research firm said.

In May, investors pulled US$1.3 billion from the fund in May, which marked the first outflows since December 2011.

The fund's assets now stand at roughly US$268 billion, down from a peak of US$292.9 billion in April, Morningstar said. The fund's assets are at their lowest since June 2012, when they stood at US$263.4 billion, Morningstar said.

CW8888: Money flowing to where now?

Investors seek safe havens, snap up S'pore govt bonds

Createwealth8888: Return of Money is far more important than Returns on Money
By EMILYN YAP

(SINGAPORE) The popularity of Singapore government bonds has surged in recent weeks as investors seek refuge in safe havens, while playing on the appreciating Singapore dollar.

The signs? Bond yields have fallen to record lows almost across the board as bond prices rise on the back of strong demand. The drop in yields was particularly evident yesterday.

The yield of 10-year Singapore Government Securities (SGS) sank from Monday's 1.81 per cent to 1.62 per cent - beating the previous trough of 1.72 per cent in January 2009 when the world was reeling from the financial crisis.

The 20-year SGS yield dipped from Monday's 2.54 per cent to 2.38 per cent - again breaching an earlier bottom of 2.5 per cent. The 5-year and 15-year bond yields also reached new lows.

Several factors have driven investors towards Singapore government bonds. The eurozone debt crisis continues to fester, while the US flirted with a debt default earlier this month as politicians fought over plans to raise the government's borrowing limit.

The safest haven in the ongoing flight to quality would be to AAA-rated countries outside of the Western hemisphere.

- OCBC economist Selena Ling

But what really roiled sentiment this week was Standard & Poor's (S&P) cutting the US credit rating to AA+ from AAA. This has burnished the attractiveness of Singapore government bonds, backed by the country's AAA credit rating.

With debt problems in the US and European Union, coupled with fears of a double-dip recession, 'the safest haven in the ongoing flight to quality would be to AAA-rated countries outside of the Western hemisphere', said OCBC economist Selena Ling.

Supporting this view, doubts have surfaced over the stability of other developed nations' credit ratings. In a report on Tuesday, Citigroup chief economist Willem Buiter went so far as to say that other AAA-rated Group of Seven (G-7) sovereigns face risks of a downgrade.

In France, especially, public debt is high and there is popular resistance to welfare cutbacks.

'We could be moving towards a world without AAA G-7 sovereigns,' he suggested. 'The criteria applied by the rating agencies to the G-7 sovereigns in the past have been, in our view, far too lenient.'

What makes Singapore government bonds stand out further is the strengthening Sing dollar.

To cap inflation, the Monetary Authority of Singapore (MAS) has allowed the currency to rise and it has increased by around 10 per cent against the US dollar in the last one year.

'In a world where AAA-rated sovereigns are becoming scarcer, we would not be surprised if real money players and even reserve money managers have increasingly diversified into SGD assets,' said Citi economist Kit Wei Zheng in a report last Friday.

Market watchers see demand for Singapore government bonds remaining strong if financial markets stay choppy, and if MAS maintains or tightens monetary policy.

Nevertheless, 'I would also caution against hopping on the SGS bandwagon at this juncture since real interest rates are currently in deeply negative territory', OCBC's Ms Ling said.

Singapore's consumer price index rose 5.2 per cent in June over the previous year.

SGS yields were not the only rates which dropped yesterday. United Overseas Bank (UOB) noted that short-term Swap Offer Rates (SOR) fell into negative territory for the first time - the three-month SOR, for instance, hit minus 0.0119 per cent.

Economists Chow Penn Nee and Suan Teck Kin cited several factors for this: the US Federal Reserve indicated that it would keep the federal funds rate low till mid-2013; the US dollar is expected to weaken against the Sing dollar in the coming months; and investors will continue to flock to safe havens such as Singapore.

'With all these concerns still likely to persist in the short to medium term, this will exert a downward pressure on SOR,' they said.

The three-month SOR is a popular benchmark used for home loans, and so is the three-month Singapore Interbank Offered Rate or Sibor. The latter remained unchanged yesterday.

SGX to offer SGS bond trading

SINGAPORE: Investors will soon be able to trade Singapore government (SGS) bonds on the Singapore Exchange from July 8.

Currently, investors can only trade SGS bonds through dealer banks.

With the new offering, SGX said investors will be able to trade the bonds through their brokers, in a manner similar to the way stocks are traded.

The exchange said this would likely improve both the price transparency and liquidity in SGS bonds.

Investors will also be able to access the bond prices on the SGX website or through their brokers.

A total of 19 SGS bond issues, with maturities of two years or more, totalling S$74 billion will be available for trading on the exchange.

SGX's fixed income market currently comprises corporate bonds and preference shares, some of them approved for investment using Central Provident Fund and Supplementary Retirement Scheme pension savings.

SGX head of fixed income Tng Kwee Lian said: "Trading of SGS bonds on SGX will make the price discovery process more efficient and transparent, thereby reducing trading cost for investors.

"Market makers will also be present, increasing liquidity and making it easier for individual investors to buy and/or sell SGS bonds at any time during the trading day".

As with securities traded on SGX, SGS bonds must be held by SGX's Central Depository (CDP) as custodian before they can be traded.

Investors will be able to view all their holdings, including SGS bonds, via a single statement from CDP.

-CNA/wk

Singapore govt bonds to trade on SGX by mid-2011

• Interest rates in Singapore near record lows
• Finance minister expects inflation to rise in coming months (adds details on bonds, inflation)

SINGAPORE, Jan 10 (Reuters) - Singapore government bonds will begin trading on the Singapore Exchange by the middle of this year, providing retail investors with a safe but higher-yielding alternative to bank deposits, Finance Minister Tharman Shanmugaratnam said on Monday.

He said retail investors concerned about the low savings rates can also participate in government bond auctions or buy high-quality corporate bonds that are now traded in smaller lot sizes on the exchange.

Singapore's annual inflation hit 3.8 percent in November, the highest since January 2009, and analysts said the rate could accelerate further in the first few months of 2011, prompting the central bank to maintain or further tighten policy.

In contrast, Singapore banks currently pay less than 0.2 percent per annum on savings deposits.

Singapore controls monetary policy by managing the exchange rate rather than setting interest rates.

"It (the consumer price index) is expected to rise further in the first quarter of this year before moderating in subsequent quarters," Tharman told parliament, citing upward pressure in global food prices.

He said the low interest rate environment in Singapore will continue for some time as the financial system is flush with cash and Western economies will keep monetary policy loose in view of their weak economies.

Corporate bonds in Singapore are usually issued in lot sizes in excess of S$100,000 ($77,234) but SGX has been encouraging firms to issue bonds in lot sizes below S$10,000 to encourage retail investors. ($1 = 1.295 Singapore Dollars) (Reporting by Nopporn Wong-Anan;; Editing by Kevin Lim)