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Expanding the Scope of Investors
MAS undertook further liberalisation of the policy on the non-internationalisation of the Singapore Dollar in December 2000 to allow non-residents to borrow Singapore Dollars freely to invest in Singapore Dollar financial assets including Singapore Government Securities (SGS), and Singapore Dollar bonds. This is expected to expand the scope of investors for these securities.
Deepening and Broadening the Singapore Government Securities Market
MAS implemented a series of initiatives to further enhance the depth and breadth of the SGS market. Some of these measures included:
a) The introduction of a securities-lending facility for Primary Dealers in June 2000. The facility offers a pool of benchmark and selected off-the-run SGS issues that Primary Dealers can access on a daily basis to facilitate their market-making activities.
b) The signing of the Public Securities Association-International Securities Market Association Master Repurchase Agreement between MAS and all Primary Dealers. The provision of standard legal documentation that meets international standards should help facilitate the entry of more foreign players into the repo market in Singapore.
c) The re-opening of an existing 5-year bond issue as a new 2-year benchmark in November 2000 with
the aim of reducing the number of illiquid off-the-run
issues and concentrating liquidity in the benchmarks.
The first 5-and 7-year SGS bond auctions of 2001 were
also re-openings of existing off-the-run issues.
d) The posting of daily SGS closing and high-low prices on the MAS website to improve price transparency.
e) The announcement of a 15-year benchmark bond issue slated for September 2001 to extend the
yield curve.
f) The institution of guidelines for the treatment of failed SGS outright trades. The elucidation of a clearly defined set of procedures for dealing with failures is in line with best practice in other developed bond markets.
Developing the Singapore Government Securities Repurchase Agreements Market
As part of its efforts to further develop the SGS repurchase agreements (repo) market, MAS allowed all SGS held under reverse-repos by a
bank, regardless of the tenure and type of counterparty,
to be included in the bank's liquid assets base for purposes of compliance with minimum liquid assets requirements from 9 May 2000. A cap of 5% of the bank ’s liabilities base would apply. To further increase the scope of activities for Offshore Banks in Singapore, MAS also allowed Offshore Banks to engage in SGS repo transactions with non-bank customers as part of their capital market activities.
Boosting the Swap Market
To develop a liquid bond market, measures were announced in February 2001 to foster greater liquidity in the Singapore Dollar swap market. From 1 March 2001, in addition to Full Banks and Restricted
Banks, Offshore Banks were allowed to participate fully in the Singapore Dollar swap market. Singapore Dollar funds received by banks from currency and foreign exchange swap transactions, irrespective of
duration, were also exempted from reserve requirements. The liberalisation measures are expected to encourage more players to enter the swap market, to boost liquidity in the swap market, and to spur the growth of
the Singapore bond market.
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