The “Nos” On Singapore Rates, “Yes/No” Combo on Initial Claims: May 30, 2025

We have a heavy week of forecast contract expirations starting this Monday. The domestic line-up includes job openings, initial jobless claims, nonfarm payrolls and the unemployment rate. Additionally, rate decisions and unemployment levels associated with both the European Union and Canada are on deck as well as the Singapore Overnight Rate Average (SORA) and the EU’s Consumer Price Index, with the last two data releases slated for Monday and Tuesday, respectively. I’ll offer my trade ideas on all of these, as usual. But today, we’ll focus on the SORA and initial claims.

SORA To Remain in Low 2s This Monday

Slowing inflationary pressures and lighter monetary policy conditions have weighed on Singapore’s yields recently. In May, the SORA averaged 2.18% and never exceeded 2.4%. The last time the figure came in above 2.4% was April 8, almost 2 months ago. In light of the strong recent tendency for the SORA to remain below 2.4%, I like the “No” answers at the 2.4%, 2.5%, 2.6% and 2.7% thresholds, which all cost either $0.95 or $0.96 and expire this Monday. I considered 2.3% as well, but the unexpected surges on certain days and my opinion of its overvalued $0.86 price keeps me away.

Claims Can Go Higher, but 260K Is Too Much

Initial unemployment claims kicked into high gear recently and have been stuck in a narrow range between 223,000 and 241,000 for eight consecutive weeks. It’s familiar territory for the indicator as you can see from the chart below. Heading into this Thursday’s report, I once again like a combination trade featuring the “Yes” answer at the 220,000 threshold for $0.85 and the “No” at 260,000 for $0.90. The total cost of the pairing is $1.75 and would deliver $2.00 back to the investor on a number as low as 221,000 or as high as 260,000.

I don’t think claims are going to fall significantly considering recent evidence of slowing labor market conditions, which is why I like the lower threshold. But I believe that the odds of the headline figure exceeding 260,000 are near zero, as it’s a level of modest stress that hasn’t been exceeded since October of 2021, almost four years ago. Finally, I also find the risk-reward profile of the “Yes” answer at 210,000 attractive, which is priced at $0.96.

Source for Images: ForecastEx

Note: Prices are highest bids as of the morning of May 30, 2025. Red circles around the thresholds were inserted by J. Torres to highlight his preferred “Yes” and “No” answers throughout different thresholds.

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