Market Summary

Yield Movements

Movements in the local currency (LCY) government bond yields in Singapore were mixed between 15 June and 15 August. Yields of shorter-term tenors (from 3 months to 1 year) increased an average of 4 basis points (bps) as demand declined because of Monetary Authority of Singapore's (MAS) lowering of banks' net stable funding ratio requirement. On the other hand, yields of longer-term tenors (from 2 years to 30 years) decreased an average of 3 bps, driven by MAS' decision in March to reduce the appreciation rate of the Singapore dollar nominal effective exchange rate policy band. The yield spread between 2-year and 10-year government bonds expanded from 62 bps to 65 bps during the review period.

Size and Composition

The LCY bond market of Singapore expanded 2.9% quarter-on-quarter (q-o-q) in the second quarter of 2020, reaching a size of SGD480.6 billion (USD344.9 billion), supported by expansions in LCY government and corporate bonds. The LCY government bond market grew 4.4% q-o-q as outstanding Singapore Government Securities bills and bonds, and MAS bills increased. Meanwhile, LCY corporate bonds outstanding jumped 0.3% q-o-q supported by increased outstanding corporate bonds in the real estate and transportation industry.

Policy, Institutional and Regulatory Developments

On 5 August, MAS announced various initiatives to support the use of the Singapore Overnight Rate Average (SORA) as a benchmark in the Singapore financial market. SORA-based notes have been issued by MAS beginning 21 August. MAS also prescribed the use of SORA as a benchmark under the Securities and Futures Act.