Market Summary

Yield Movements

Between 1 June and 15 August, Singapore’s local currency (LCY) bond yields decreased for all maturities except the 3-month and 12-month tenors, which increased 9 basis points (bps) and 4 bps, respectively. Singapore’s yields tracked interest rate movements in the United States (US) where short-term tenors increased and long-term tenors declined during the review period. Short-term rates in Singapore also increased due to tightening liquidity in the domestic banking system, as evidenced by rising loan-to-deposit ratios and a narrowing differential between the 1-month and 3-month yields. For long-term tenors, Singapore yields dropped following US Treasury yields’ decline after the People’s Republic of China announced potential tariffs in response to tariffs imposed by the US on Chinese goods.

Size and Composition

The Singapore LCY bond market grew 1.8% quarter-on-quarter to SGD383 billion (USD281 billion) in 2018, up from SGD376 billion in Q1 2018. The expansion was supported by growth in LCY government bonds, compensating for the slight decline in LCY corporate bonds.

Policy, Institutional and Regulatory Developments

On 7 June, the International Finance Corporation and the Monetary Authority of Singapore signed a memorandum of understanding to promote green bonds in Asia and the Pacific. They will hold capacity building programs to improve awareness and knowledge of green financing issuances, and will promote international best practices and frameworks related to green bonds.