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Source:
www.mas.gov.sg |
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MAS Launches Electronic Trading
Platform for SGS, and Introduces New Standing Facility for S$
Transactions |
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The Monetary Authority of Singapore (MAS)
has launched an electronic bond trading platform for Singapore
Government Securities (SGS), and introduced a new standing facility for
Singapore dollar transactions. |
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These initiatives are part of MAS' efforts
to enhance the sophistication and efficiency of Singapore's financial
markets. |
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SGS Electronic Bond Trading Platform |
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Jointly developed by MAS, Bloomberg and the
SGS Primary Dealer community, the Singapore Government Securities
Electronic Bond Trading platform (SGS E-Bond platform) is part of an
overall effort by MAS to introduce greater price transparency to
financial markets. |
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The first phase of the SGS E-Bond platform
went live in July 2005. Under this phase, last-traded prices and trade
volumes by SGS Primary Dealers would be automatically and instantly
available on Bloomberg. |
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The next phase, which was implemented on 3
May 2006, features a quote-driven electronic order book for price
providers to leave their bids and offers. By publishing pre-trade
prices, this enhancement brings the market to an even higher level of
transparency. |
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The new platform will boost investor
confidence by promoting more efficient price discovery. This will
increase the resilience and transparency of the market and bring about a
more robust yield curve. |
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The initiative will help attract more
issuers and investors to participate in the Singapore dollar bond market
as well as improve the resilience of the market in times of stress. |
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MAS Standing Facility |
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MAS will introduce a Standing Facility on 1
June 2006 that will allow SGS Primary Dealers to initiate Singapore
dollar deposit or borrowing transactions with MAS on an interest-paying
overnight basis. |
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The facility will fine-tune the management
of Singapore dollar liquidity by making use of information available to
SGS Primary Dealers to adjust the aggregate supply of Singapore dollars.
This will help moderate intra-day interest rate volatility and ease
potential frictional demand for Singapore dollar liquidity. |
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The MAS Standing Facility is unique [1]
in that interest rates under the Facility will be based on a
market-determined rate. This is determined on a daily basis via an
auction of overnight clean borrowing from Primary Dealers in the morning
of each working day through MAS' daily money market operations. |
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The weighted average of successful bids will
form the reference rate for that day. The rate at which Primary Dealers
may borrow from the facility will be 50 basis points above the day's
reference rate, while the deposit rate will be 50 basis points below the
reference rate. |
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The introduction of the Standing Facility
does not represent a departure from MAS' exchange-rate based monetary
policy, and does not constitute a mechanism for interest rate targeting. |
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1
Other central banks base borrowing or deposit rates around a fixed
policy rate set by the central bank |
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Source:
www.mas.gov.sg Press Release 10
May 2006 |
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Notes: |
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SGS Market.
In 1998, MAS initiated a series of measures to facilitate the
development of bond markets in Singapore. One such initiative was the
creation of a deep and liquid government benchmark yield curve to serve
as a benchmark for private sector debt issuance. Over the period from
1997 to 2005, total outstanding SGS has almost quadrupled to about S$78
billion as at end-2005. Daily SGS trading volume is approximately S$1.7
billion, almost five times that in 1997. |
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Monetary Policy.
Singapore's monetary policy has since 1981 been focused on the exchange
rate. MAS manages the Singapore dollar exchange rate against a
trade-weighted basket of currencies of its major trading partners and
competitors, within an undisclosed target band. The MAS intervenes in
the foreign exchange market to prevent excessive fluctuations in the S$
exchange rate, consistent with the prevailing exchange rate policy and
underlying economic fundamentals. To complement its exchange rate
policy, MAS conducts money market operations to ensure that there is an
appropriate level of liquidity in the banking system. Money market
instruments used for this purpose are mainly foreign exchange swaps,
direct borrowing and lending transactions with banks, as well as SGS
transactions. With an open capital account, MAS does not pursue interest
rate or money supply targets. |
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FrontPage Edition: Sat 13 May 2006
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