A Last Word : The End of Higher SIBOR For Now

After today’s surprise Monetary Policy Statement from the MAS. People, rejoice. My view is that it is the end of the road for higher SIBOR from now.

MAS did the public a favour with this swoop to end the agonising wait till April for all those mortgages waiting for their fixings.

Why ?

By eliminating the element of speculation, the market will go back to normal as expectations for easing will cease. This is evidenced in today’s reactions in the forwards, SIBOR and SOR, versus the lackadaisical LIBOR.




Post announcement, the SIBOR and SOR have not matched their early Jan highs.

It is the same for the 1 year and 2 year swap rates. Note  that 1Y and 2Y USD are still at 0.405% and 0.765% respectively.

1 year and 2 year interest rate swap rates

1 year and 2 year interest rate swap rates


A comparison of where the rates are priced in 6 month tenors.


Singapore rates are ahead of the curve for once and well ahead of US rates in the short end.

All this in a disinflationary environment mainly because low inflation is bad for Singapore rates like I mentioned last year. https://tradehaven.net/market/why-higher-inflation-is-good-for-singaporeans/

MAS pulls a quick one to save the people from anymore torment because that 40 bucks I save from petrol is not going to make up for the increased monthly mortgage installments.

And to cap it off, we have another 46 bio left in the MAS forwards book which has come down from its high of 126 bio back in Aug 2011 that incidentally coincided with the all time historic low of USDSGD.  We can assume that most of that increase back then in Aug-Sep 2011 was due to USDSGD intervention that resulted in USDSGD rising from 1.20 to 1.30 in the short span of a month.

To picture the relationship.

mas fwds book and usdsgd

The forwards book is almost always long USD which MAS uses to conduct their daily liquidity operations that has always been invariably to withdraw SGD from the system by lending out the USD.

MAS can now let the fwds, all 46 bio of it, lapse i.e. returning the SGD into the system to inject liquidity without affecting spot fx i.e. USDSGD, like they have been doing for the past 2 years.

To read more about this, refer to the MAS monograph published in 2013, that has done some good in shedding light on the black box . http://www.mas.gov.sg/~/media/MAS/About%20MAS/Monographs%20and%20information%20papers/20130313%20Monetary%20Policy%20Operations%20Monograph.pdf

I guess, just like Switzerland, they are just tired of defending against the tide that will be coming from the ECB, all 1 trillion dollars of it !!

Afterword : To clarify, the SNB and MAS are on different sides of the spectrum – the SNB to weaken their currency and MAS to appreciate. MAS has decided to let it appreciate less while the SNB has decided to unpeg. MAS will continue with intervention, albeit less of it and the SNB is free to do what they want.


Some past articles :