Market Summary

Yield Movements

Local currency (LCY) government bond yields in Singapore declined for all tenors between 28 February and 15 May. Yields of shorter-term tenors (from 3 months to 1 year) declined an average of 134 basis points (bps). Yields of longer-term tenors (from 2 years to 30 years) decreased an average of 68 bps. The downward shift in the yield curve occurred amid policy easing by Monetary Authority of Singapore (MAS) meant to support the domestic economy amid disruptions cause by the coronavirus disease (COVID-19). The yield spread between 2-year and 10-year government bonds expanded from 11 bps to 48 bps during the review period.

Size and Composition

The LCY bond market of Singapore expanded 2.2% quarter-on-quarter (q-o-q) in the first quarter of 2020, reaching a size of SGD467.2 billion (USD328.5 billion), supported by expansions in LCY government and corporate bonds. The LCY government bond market grew 2.5% q-o-q as outstanding Singapore Government Securities bills and bonds, and MAS bills increased. Meanwhile, LCY corporate bonds outstanding jumped 1.7% q-o-q supported by increased outstanding corporate bonds in the real estate industry.

Policy, Institutional and Regulatory Developments

On 7 April, MAS adjusted downward the net stable funding ratio requirement to 25% from 50%. MAS also allowed financial institutions to factor in the government's fiscal assistance and banks' relief measures in accounting loan loss allowance. Furthermore, the implementation of Basel III reforms for Singapore banks has been deferred for 1 year. The adjustments in regulatory and supervisory measures are meant to support financial institutions as they deal with the impacts of the COVID-19 pandemic.