Market Summary

Yield Movements

Between 1 August and 15 October, Singapore’s local currency (LCY) bond yields increased for all maturities. The 5-year maturity increased the most, gaining 22 basis points (bps). The 2-year tenor registered the smallest increase of 12 bps. The yield spread between 2-year and 10-year government bonds expanded 6 bps during the review period. Singapore’s yields tracked interest rate movements in the United States, where all tenors increased during the review period. The US Federal Reserve raised interest rates most recently in September, with another increase expected before the year ends as the Federal Reserve continues its monetary policy normalization. Strong US economic data, including high economic growth and low unemployment rates, and expectations of another rate hike, contributed to the rise in interest rates.

Size and Composition

The Singapore LCY bond market grew 2.0% quarter-on-quarter to SGD398 billion (USD291 billion) in the third quarter (Q3) of 2018, up from SGD390 billion in the second quarter of 2018. The expansion was supported by growth in LCY government and corporate bonds. Total outstanding LCY government bonds increased 1.6% q-o-q in Q3 2018 to reach SGD241 billion at the end of September from SGD237 billion at the end of the previous quarter. LCY corporate bonds expanded 2.5% q-o-q in Q3 2018.

Policy, Institutional and Regulatory Developments

On 24 August, the Monetary Authority of Singapore and the Singapore Exchange joined Anquan, Deloitte, and Nasdaq as technology partners in developing delivery-versus-payment capabilities for settling securities that use a blockchain platform. The project aims to reduce settlement risk between buyers and sellers, and to increase operational efficiency.