Thursday, November 5, 2015

SSB: Nov 2015 Review, Dec 2015 Preview

The final details of the Nov 2015 issue came out a while ago and it was a total flop if you ask me.


The issue was only 21% filled, which is a huge drop from the initial 34% in the previous month. Looks like I was totally wrong that the (1) $100,000 maximum allowance still being unfilled, (2) higher rates than the previous issue and (3) increase in media exposure would translate into attracting more people to the SSB.

When the human element gets involved, nothing is for sure. Unlike a lot of exchanges, the SSB "market" is completely immune to technology like HFTs or algos replacing humans to make rational decisions.

With that said, I predict that future SSB issues from this point forward will be very low, although it is plausible that over time that people will learn more about the SSB and warm up to it, much like the different CPF-IS schemes and the SRS account.


The Dec issue is out already. As you can see, we should have expected a very strange thing to happen with this issue. The "yield curve" of the December issue should have be inverted, since the proxy that we are looking at has the 1 year yield is higher than the 2 year yield.

I don't know what other people know about the yield curve, but I've learnt that inversion is generally not a healthy sign. Why? Because banks will not borrow at a higher rate than what they lend out. So credit stops flowing, which makes things pretty bad, especially for anything that is levered.

So, as I expected, they did not allow the 1 year yield to be higher than the 2 year yield. While the rest of the yields follow very closely to their predictions (>3% error), the 1 year rate is off by almost a whooping 8%. Intervention much? I would say so.

The Dec issue is very weak overall. The tail end is the lowest so far. The short end is even weaker than the last issue. Banks have already adjusted some their products and released new fixed deposit promotions, making this SSB pale in comparison.

If you thought the Nov issue take-up rate was bad, wait til we see how the Dec issue is like! The total offer is the same at 1.2b, so I would bet that the take-up rate is less than 20%! Can we get below 15%? I think we can! I am counting on you, ignorant Singaporeans!

Personally, I applied for the Nov issue. I doubt I will be applying for more SSBs for a while.

What a whole load of hot air over nothing, eh?

6 comments:

  1. Hi GHGM
    You are right in predicting the yield for Nov 2015 will be higher than Dec 2015. I regretted not applying for the Nov 2015 issue.
    Thank you.

    ReplyDelete
    Replies
    1. Hi Anon,

      No regrets, just have a plan for the next time then!
      No problem, I'm just sharing what I come across :)

      Delete
  2. I think it's going to be below 10%!

    Even I am sitting out this time round...

    ReplyDelete
    Replies
    1. Wow Mr 15HWW, below 10%? Actually.... I think also below 10%, but that felt a bit bold to call for, hahaha! I read an article somewhere how banks fearing the SSB issues will suck out liquidity was totally overblown especially with the really paltry take-up rates.

      I bet the banks are sitting on billions of dollars in cash deposits and are happily paying the negligible interests on them!

      Delete
  3. My feel is that it should be going up when US fed rate were to move up in Dec, more because of change in expectation resulting in upward shift in the yield curve.

    ReplyDelete
    Replies
    1. Hi Robert,

      I don't want to sound like a Debbie-downer, but the Fed has been saying they will be hiking rates since forever. However, I do suspect that rates will rise based on expectations, but would quickly collapse when the Fed, once again, fails to hike rates even by a minuscule 25bps.

      Delete

Observe the house rules.