MAS is likely to ease monetary policy at the upcoming policy meeting on 14th April 2015 by re-centering the band’s mid-point to below the prevailing level of S$NEER.
Many market participants believe the MAS will instead widen the SGD NEER band or keep the policy unchanged; with a small minority expecting a further reduction in the slope. If the downward re-centering is 1% or more below the current mid, SGD will weaken by around 0.6% from prevailing levels. Inflation differential to USD suggest that SGD bonds have cheapened enough to warrant being overweight.“Our base case is that MAS will re-center the band lower to the prevailing SGD NEER. We also note that long-end Singapore bond yields are cheap and attractive relative to other AAA counterparts and USD bonds.” – said BofA Merrill Lynch in a report
The material has been provided by InstaForex Company – www.instaforex.com