Market Summary

Yield Movements

Between 1 March and 15 May, local currency (LCY) government bond yields in Singapore rose for all tenors. The yield for 2-year Singapore Government Securities (SGS) bonds increased the most at 30 basis points. Singapore’s interest rates mainly tracked interest rate movements in the United States (US) during the review period; all tenors on the US yield curve likewise increased between 1 March and 15 May. The slower rise at the long-end of the curve signaled that investors believe long-term growth prospects are little changed by recent developments.

Size and Composition

Singapore’s LCY bonds outstanding amounted to SGD376 billion (USD287 billion) at the end of March, an expansion of 3.7% quarter-on-quarter and 8.2% year-on-year. The expansion was supported mainly by the increase in outstanding government bills and bonds. LCY government bonds expanded to SGD230 billion at the end of March, while outstanding LCY corporate bonds increased to SGD146 billion.

Policy, Institutional and Regulatory Developments

On 2 May, the Monetary Authority of Singapore announced new regulations, effective 1 October, that will require over-the-counter derivatives to be cleared through central counterparties. The regulations are meant to mitigate the credit risk of nonstandard derivatives. The regulations will cover the widely traded Singapore and US dollar fixed-for-floating interest rate swaps, and will require banks with gross notional outstanding over-the-counter derivative transactions exceeding USD20 billion to clear their trades with central counterparties regulated by the Monetary Authority of Singapore.