OOK L T

DAILY TREASURY OUTLOOK
Treasury Research
Selena Ling
+65 6530-4887
LingSSSelena@ocbc.com
Emmanuel Ng
+65 6530-4073
NgCYEmmanuel@ocbc.com
Wellian Wiranto
+65 6530-5949
WellianWiranto@ocbc.com
Tommy Xie Dongming
+65 6530-7256
XieD@ocbc.com
Barnabas Gan
+65 6530-1778
BarnabasGan@ocbc.com
Monday, November 24, 2014
Highlights
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
OCBC Credit Research
Lee Chok Wai
+65 6722-2215
ChokWaiLee@ocbc.com
OCBC Wing Hang
Iris Pang
+852 2852-5289
IrisPang@ocbcwh.com
Timothy Sham
+852 2852-5791
TimothyPYSham@ocbcwh.com
Treasury Advisory
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Tel: 6349-1888 / 1881
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Tel: 6349-1899
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Tel: 6349-1886
GT Institutional Sales
Tel: 6349-1810




With most of the global economy recently shifting to a lower gear, it
was unsurprising that some major central banks have rushed into
action – the latest being China’s PBOC which cut both its 1-year
lending and deposit rates by 40bps and 25bps respectively to 5.6%
and 2.75% for the first time in more than two years amid slowing
economic signals in order to reduce lending cost. The ECB also joined in
the chorus, with Draghi indicating that “if, on its current trajectory, our
policy is not effective enough to achieve this, or further risks to the
inflation outlook materialize, we would step up the pressure and broaden
even more the channels through which we intervene, by altering
accordingly the size, pace and composition of our purchases” and we will
act as “fast as possible”, potentially suggesting that sovereign QE could
be on the 2015 cards. This tit-for-that policy action starting first with the
BOJ, then the PBOC and with others like the ECB lining up as well, may
mean an eventful approach into the year-end, given that there’s still a
host of central bank policy meetings including RBI (2/12), BOC (3/12),
BOE (4/12), ECB (4/12), RBNZ (11/12), BSP (11/12), BOK (11/12), BI
(11/12), BOT (17/12) and FOMC (18/12). Meanwhile, on the fiscal side,
the policymakers have not been idle either, with Indonesia and Malaysia
delivering on their fuel subsidy cuts as part of fiscal consolidation efforts,
and EU’s modest 3 year plan for a EUR21b risk-sharing fund to spur
investments with a proposed 15x leverage rate.
Key economic data releases: US’ Kansas City Fed manufacturing
activity index improved more than expected from 4 in Oct to 7 in Nov
(highest since Jul). With US Thanksgiving holiday coming up on
Thursday, key focus today will be US’ Chicago Fed national activity index,
prelim Nov Markit services/composite PMIs, and Dallas Fed
manufacturing activity; German IFO; Taiwan’s Oct industrial production
and S’pore’s Oct CPI.
th
Wall Street gained on Friday, capping a 5 week of gains, led by
energy and raw-material stocks: Dow +0.51%, S&P500 +0.52% and
Nasdaq +0.24%. VIX -5.01% to 12.90.
The US Treasury bonds gained on Friday, with the yield curve on a
flattening bias: The 2- and 10-year bond yields were at 0.505% and
2.31% respectively. The Treasury Department will auction US$105b in
notes this week, comprising US$28b 2-year notes today, US$13b 2-year
floating-rate notes and US$35b of 5-year notes tomorrow, and US$29b 7year debt on 26 Nov.
Singapore: We tip today’s Oct CPI to come in at 0.8% yoy (+0.3% mom
nsa), compared to Sep’s +0.6% yoy (-0.1% mom nsa), with core CPI at
1.7% yoy amid subdued global commodity prices, but a tight domestic
labour market. The Q3 GDP growth estimates due at 8am tomorrow may
be revised marginally higher from the flash +2.4% yoy (+1.2% qoq saar)
to 2.5% yoy (+1.5% qoq saar) to account for the Sep manufacturing data.
China: The central bank delivered a surprise benchmark interest rate cut
24 November 2014
Daily Treasury Outlook
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on Friday night, two days after China's State Council pledged to lower the
funding costs for the real economy. It is also the first benchmark interest
rate change since July 2012.
Malaysia: The government announced on Friday afternoon that, starting
from Dec 1, RON 95 and diesel will no longer be subsidized. Instead of
being priced at fixed rates, the prices will be floating on a monthly basis
according to an automatic adjustment process based on average market
prices of the preceding month.
Commodities: The CRB index rose 0.36% as crude oil and gold
rebounded on the surprise interest cut announced by China on Friday last
week. In addition, news that Iran will try to persuade Saudi Arabia to cut
oil production, ahead of the Nov 27 OPEC meeting, may add further
upside pressure to oil prices for the week. Still, geopolitical tensions
concerns may slowly take root once again, as Iran nuclear talk is
reportedly met with little conclusion, and looks to be extended as six world
powers, including US and EU, seeks to end Iran’s nuclear programme in
exchange for lifting UN sanctions.
Major Markets
Treasury Research & Strategy

Singapore: The STI added 0.90% to end at 3345.32 on Friday, and may
trade firmer today in a 3330-3360 range today amid morning gains by
Kospi. Expect SGS bond yields to edge down by around 1bp today.

China: Unlike previous rate cut, the latest policy shift has been designed
in a complex manner with two key features. First, the PBoC cut 1-year
deposit rate by 25 bps but slashing the 1-year lending rate by 40bps. The
asymmetric rate cut is a strong easing signal to bolster the growth.
Second, the PBoC will allow banks to set the deposit rate at maximum
20% above benchmark deposit rate, up from previous 10%, a further step
towards interest rate liberalization. This signals that the central bank's
commitment to reform remains unchanged. The combination of interest
rate cut and interest rate liberalization suggests the PBOC still tries to
convince the market that their prudent monetary policy tone remains
intact despite the unexpected cut.

Malaysia: The KLCI softened by 0.72% to close at 1809.13 after the
government’s surprise announcement on fuel subsidy removal. Some tail
effect of that may still be felt today despite a generally supportive global
environment.

Commodities: Net-long speculative positions across 19 US commodities
options and futures gained 39.9k to 848.2k for the week ended 18 Nov
2014, according to CFTC data. The gains were on the back of higher netlong positions in gold, and defensive commodities like wheat, live cattle
and corn. Still, crude oil net-long positions fell, as investors weigh
between the upcoming OPEC production decision and the relatively
abundant crude supplies in the market.
2
24 November 2014
Daily Treasury Outlook
Bond Market Update

Treasury Research & Strategy
Market Commentary: Last Friday, the SGD swap rates traded about
1bp-2bp lower across the curve, with the exception of 30-year rate that
dipped by ~6bp. In the SGD corporate bonds space, there were two-way
flows on CHEUNG 5.125% perp-c’16 while we saw enquiries on the more
liquid oil & gas names such as EZRA from retail accounts. In the primary
market, the Housing & Development Board priced a S$600mn 12-year
issue at 3.22%.
3
24 November 2014
Daily Treasury Outlook
Key Financial Indicators
Foreign Exchange
Day Close % Change
DXY
88.310
0.82%
USD-JPY
117.790
-0.36%
EUR-USD
1.2391
-1.18%
AUD-USD
0.8670
0.58%
GBP-USD
1.5656
-0.23%
USD-MYR
3.3555
-0.33%
USD-CNY
6.1248
-0.02%
USD-IDR
12147
-0.23%
USD-VND
21375
0.02%
USD-SGD
EUR-SGD
JPY-SGD
GBP-SGD
AUD-SGD
NZD-SGD
CHF-SGD
SGD-MYR
SGD-CNY
Day Close % Change
1.2997
-0.05%
1.6105
-1.23%
1.1034
0.34%
2.0346
-0.29%
1.1269
0.54%
1.0248
0.17%
1.3403
-1.21%
2.5826
-0.09%
4.7130
0.02%
Equity and Commodity
Index
Value Net change
DJIA
17,810.06
91.10
S&P
2,063.50
10.80
Nasdaq
4,712.97
11.10
Nikkei 225 17,357.51
56.60
STI
3,345.32
29.70
KLCI
1,809.13
-13.20
JCI
5,112.05
18.50
Baltic Dry
1,324.00
-8.00
VIX
12.90
-0.70
Interbank Offer Rates (%)
Tenor
EURIBOR Change
1M
0.0090
-2M
0.0410
-0.0010
3M
0.0810
-6M
0.1810
-9M
0.2560
-0.0020
12M
0.3340
-0.0020
Tenor
O/N
1M
2M
3M
6M
12M
USD Libor
0.1015
0.1553
0.2045
0.2329
0.3269
0.5643
Government Bond Yields (%)
Tenor
SGS (chg)
UST (chg)
2Y
0.54 (+0.02) 0.50 (-0.01)
5Y
1.50 (-0.01) 1.61 (-0.02)
10Y
2.32 (--) 2.31 (-0.03)
15Y
2.68 (--)
-20Y
2.84 (--)
-30Y
2.97 (--) 3.02 (-0.04)
Singapore Rates (%)
Tenor
SOR Fixing
1D
0.2053
1M
0.3212
3M
0.3278
6M
0.3856
Tenor
1M
3M
6M
12M
Change
0.0071
-0.0090
0.0244
0.0078
Change
0.0021
0.0003
-0.0010
-0.0000
-0.0018
0.0025
Financial Spread (bps)
Value
LIBOR-OIS
12.23
EURIBOR-OIS
9.40
TED
22.77
SGD SIBOR Change
0.3690
-0.0021
0.4178
-0.5086
-0.6318
--
Change
0.18
--0.52
Eurozone & Russia Update
2Y Bond Ylds (bpschg) 10Y Bond Ylds (bpschg)
Portugal
Italy
Ireland
Greece*
Spain
Russia*
0.57
0.52
0.06
6.67
0.39
4.39
-5.30
-7.70
-0.80
-50.60
-3.90
-4.90
3.00
2.21
1.49
7.93
2.01
5.08
-12.80
-9.20
-5.00
-32.80
-8.70
0.00
10Y Bund
Spread %
2.23
1.44
0.72
7.16
1.24
4.31
CDS
208.54
137.79
57.35
452.30
103.75
283.00
CDS
Change
-0.64
3.34
2.68
--0.74
-7.67
Equity
Index
2339.69
19954.51
4970.47
995.07
10520.80
1538.93
% Change
2.29
3.88
1.72
3.67
3.05
8.53
* Shows 3-year bond yields rather than 2-year
Com m odities Futures
Energy
WTI (per barrel)
Brent (per barrel)
Heating Oil (per gallon)
Gasoline (per gallon)
Natural Gas (per MMBtu)
Futures
76.51
80.36
2.405
2.06
4.266
% chg
1.23%
1.30%
1.03%
1.43%
-4.97%
Soft Com m odities
Coffee (per lb)
Cotton (per lb)
Sugar (per lb)
Orange Juice (per lb)
Cocoa (per mt)
Futures
1.897
0.5976
0.1609
1.4435
2,867
% chg
1.04%
2.08%
-0.06%
1.26%
-0.42%
Base Metals
Copper (per mt)
Nickel (per mt)
Aluminium (per mt)
Futures
6,725.0
16,587
2,065.0
% chg
0.90%
1.63%
1.05%
Grains
Wheat (per bushel)
Soybean (per bushel)
Corn (per bushel)
Futures
5.4725
10.390
3.7275
% chg
-1.81%
-0.13%
Precious Metals
Gold (per oz)
Silver (per oz)
Futures
1,197.7
16.395
% chg
0.57%
1.60%
Asian Com m odities
Crude Palm Oil (MYR/MT)
Rubber (JPY/KG)
Futures
2,215.0
190.2
% chg
0.09%
0.32%
Source: Bloomberg, Reuters
(Note that rates are for reference only)
Treasury Research & Strategy
4
24 November 2014
Daily Treasury Outlook
CFTC Commodites Futures and Options
For the week ended: 18 Nov 2014
Current
Previous
Net Chg
Gold
84,877
54,756
30,121
Cotton
Current
Previous
Net Chg
1,824
18,851
Wheat
-4,973
-20,300
15,327
-17,027
Nymex Crude
276,213
289,184
Live Cattle
130,376
121,309
-12,971
9,067
Soybean
51,767
60,586
Corn
288,440
-8,819
281,908
6,532
Cocoa
39,350
41,439
-2,089
Lean Hogs
RBOB Gasoline
78,410
72,105
6,305
Natural Gas
-209,781
-208,017
-1,764
66,779
60,661
6,118
Palladium
20,628
22,214
-1,586
Heating Oil
-23,351
-28,700
5,349
Platinum
21,023
22,594
-1,571
Coffee
43,447
40,878
2,569
Copper
-24,781
-25,695
914
Silver
6,047
4,366
1,681
Sugar
4,832
3,413
1,419
Source: CFTC
Key Economic Indicators
Date
11/21/2014 10:00
11/21/2014 12:00
11/21/2014 15:30
11/21/2014 17:30
11/21/2014 17:30
11/21/2014 17:30
11/21/2014 21:30
11/21/2014 21:30
11/21/2014 21:30
11/21/2014 21:30
11/24/2014 08:30
11/24/2014 13:00
11/24/2014 13:00
11/24/2014 16:00
11/24/2014 17:00
11/24/2014 17:00
11/24/2014 17:00
11/24/2014 21:30
11/24/2014 22:45
11/24/2014 22:45
11/24/2014 23:30
11/24/2014
11/24/2014 11/26
11/24/2014 11/27
11/24/2014 11/27
11/24/2014 11/27
11/24/2014 11/28
NZ
MA
TH
UK
UK
UK
CA
CA
CA
CA
Event
Credit Card Spending YoY
CPI YoY
Foreign Reserves
Public Finances (PSNCR)
Public Sector Net Borrowing
PSNB ex Banking Groups
CPI NSA MoM
CPI YoY
CPI Core MoM
CPI Core YoY
Oct
Oct
Nov-14
Oct
Oct
Oct
Oct
Oct
Oct
Oct
Survey
-3.00%
--7.0B
7.7B
-0.20%
2.10%
0.20%
2.10%
Actual
6.70%
2.80%
$159.2B
-2.6B
7.1B
7.7B
0.10%
2.40%
0.30%
2.30%
Prior
4.40%
2.60%
$159.7B
17.7B
11.1B
11.8B
0.10%
2.00%
0.20%
2.10%
Revised
4.50%
--18.2B
10.6B
11.2B
-----
TA
SI
SI
TA
GE
GE
GE
US
US
US
US
VN
SK
TH
TH
TH
PH
Unemployment Rate
CPI NSA MoM
CPI YoY
Industrial Production YoY
IFO Business Climate
IFO Current Assessment
IFO Expectations
Chicago Fed Nat Activity Index
Markit US Services PMI
Markit US Composite PMI
Dallas Fed Manf. Activity
CPI YoY
Department Store Sales YoY
Customs Exports YoY
Customs Imports YoY
Customs Trade Balance
Budget Balance PHP
Oct
Oct
Oct
Oct
Nov
Nov
Nov
Oct
Nov P
Nov P
Nov
Nov
Oct
Oct
Oct
Oct
Oct
3.90%
0.20%
0.60%
7.50%
103
108
98.5
0.4
57.3
-9
2.98%
-0.35%
-3.30%
-$882M
--
------------------
3.90%
-0.10%
0.60%
10.30%
103.2
108.4
98.3
0.47
57.1
57.2
10.5
3.23%
-6.30%
3.19%
14.42%
-$1798M
-5.2B
------------------
Source: Bloomberg
Treasury Research & Strategy
5
24 November 2014
Daily Treasury Outlook
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