Singapore Outlook. SGS Bond Strategy. Tuesday, May 22, Highlights

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1 Singapore Outlook SGS Bond Strategy Treasury Research Tel: Highlights Tuesday, May 22, MAS will auction $2.2 billion, with MAS taking $200 million, of the 5-year SGS bond maturing July 2023, with the tender closing at noon on 28 May. This bond was currently trading around 2.37%. The issue size is larger than market expectations for a re-opening and may weigh on the belly of the SGS yield curve in the interim. The last two re-openings were only $800m in Apr18 and $1b in Nov17 which fetched cut-off yields of 2.08% and 1.77% respectively with bidcover ratios of 2.16x and 2.31x. In contrast, the $2.9 billion issue in February had a relatively low cut-off yield of 1.86% and hence fetched a bid-cover ratio of only 1.97x. Given that the 5-year UST yield has surged to 2.89% (essentially back to Sep 2009 levels), but the current 5-year SGS benchmark bond yielding only 2.27% (around Sep 2015 levels), the UST-SGS spread has widened to 63bps, up from a 10-year historical average of 38bps. Moreover, the next SGS bond maturity is only in Sep when $6.8 billion of 15-year SGS bond falls due, the demandsupply dynamics do not favour the current re-opening of the July 2023 bond in the near-term and we could see further pressure for bond yields to move higher from here. That said, short-term funding conditions have stabilised recently, with the 3-month SIBOR and SOR anchored around 1.5% handle, after a brief blip to % on 9 May for the latter. While the broad USD is still supported on rate differential arguments, nevertheless, the 10-year UST bond yield appears to be taking a breather after touching the recent high of 3.12% high. Given that the July 2023 SGS bond has seen its yield climb by around 57bps for the year-to-date, there may be value emerging on an absolute basis. We think fair value for the reopening of the July 2023 will be capped around 2.45%. Selena Ling Tel: LingSSSelena@ocbc.com

2 22 May SGS Bond Strategy SGS Yield Curve Past 5y SGS bond auction results AUCTION AMOUNT (S$M) ISSUE DATE BID-TO-COVER RATIO CUT-OFF YIELD (%) MEDIAN YIELD (%) AVERAGE YIELD (%) 2,500 01/04/ /10/ /04/ ,200 01/10/ ,600 01/10/ ,500 01/04/ ,300 01/03/ ,100 01/04/ ,800 03/02/ ,900 01/10/ ,800 01/07/ ,100 01/02/ ,200 03/10/ ,600 03/04/ ,000 01/11/ ,900 01/02/ /04/ Treasury Research & Strategy 2

3 22 May SGS Bond Strategy Outstanding SGS bonds for Outstanding SGS (as at 02 May ) Maturity Issue Code ISIN Code Issued Coupon Rate (%) Amount (S$m) Interest Payment 01/09/ NY03100A SG /09/ ,800 1/3 1/9 01/06/2019 NX09100W SG7S /06/ /2 8,700 1/12 1/6 01/10/2019 N514100H SG /10/ /8 7,100 1/4 1/10 Gross & net issuance of & SGS bonds Year Redemption Redemption Net increase/decrease Net increase/decrease ,800 12, ,800 8,600 3,000 3, ,000 12, ,800 9,900 16,200 2, ,100 13, ,100 9,800 5,000 3, ,200 15, ,200 11,500 2,000 4, ,000 16, ,100 13, , ,400 14, ,600 11,400-21,200 3, ,000 18,800 38,800 14,700-30,800 4, ,500 16,300 8,000 9, , ,000 18,800 8,500 15, , ,500 15,500 9,000 10, ,500 Jan-Apr 5,100 8,100 4,700 6, ,400 Treasury Research & Strategy 3

4 22 May SGS Bond Strategy SGS bond issuance calendar (excluding mini-auctions) Announcement Auction Tenor New/Re- Opening Issue Code/ISIN Code Maturity Mon, 22 Jan Mon, 29 Jan Thu, 01 Feb 5-yr New N518100E/ SG31B Feb 2023 Mon, 19 Feb Mon, 26 Feb Thu, 01 Mar 30-yr NA16100H/ SG31A Mar 2046 Tue, 20 Mar Tue, 27 Mar Mon, 02 Apr 2-yr N515100S/ SG31A Jul 2020 Thu, 19 Apr Thu, 26 Apr Wed, 02 May 10-yr New NX18100A/ SG31B May 2028 Mon, 21 May Mon, 28 May Fri, 01 Jun 5-yr NX13100H/ SG Jul 2023 Wed, 20 Jun Wed, 27 Jun Mon, 02 Jul 20-yr NZ16100X/ SG31A Aug 2036 Fri, 20 Jul Fri, 27 Jul Wed, 01 Aug 7-yr ** NX16100F/ SG31A Jun 2026 Tue, 21 Aug Wed, 29 Aug Mon, 03 Sep 2-yr NY05100N/ SG Sep 2020 Wed, 19 Sep Wed, 26 Sep Mon, 01 Oct 15-yr NZ13100V/ SG Sep 2033 Source: Bloomberg, MAS, OCBC Treasury Research & Strategy 4

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