At the MAS Annual Report Press Conference on 29 July 2010, MAS announced that it would be issuing short-term MAS Bills as part of its Money Market Operations (MMO).
Hitherto, MAS used three instruments to inject and withdraw liquidity into and from the banking system at its daily MMO. These are: (i) FX swaps or reverse swaps; (ii) SGS repos or reverse repos; and (iii) clean lending or borrowing. The introduction of MAS Bills thus created a fourth instrument for the management of banking system liquidity.
The development of MAS Bills is particularly apt in the face of the changing regulatory landscape which has seen greater demand for government and central bank debt securities amid a growing banking system and higher liquidity requirements. In this regard, MAS Bills will help to meet the needs of banks in Singapore for more regulatory and liquid assets.
The timing and amount of individual MAS Bill issues is decided by MAS, in consultation with primary dealers. MAS takes into consideration its sterilisation requirements which are in turn very much affected by exogenous factors such as the trend of capital flows into the region.