MAS Annual Report 00/01

Singapore Government Securities Market

The SGS yield curve flattened in the first quarter of 2000 as financial institutions liquidated their holdings of shorter-dated securities accumulated to ensure Y2K liquidity. In April and May 2000, strong US economic data releases prompted fears of interest rate hikes by the US Federal Reserve. Coupled with MAS' announcement of its intention to build larger and more liquid benchmark issues of between $2.0 billion and $2.5 billion, this caused yields to shift upwards across the curve,with the yield on the 10-year SGS bond reaching a high of 4.7% in June 2000.

Long-dated SGS prices rallied in the second half of the year, as indications of slowing US economic growth emerged. Other contributing factors were the decline in interest rate swap levels related to Singapore Dollar corporate bond issues by non-residents and MAS' first bond repurchase operation in November 2000. The repurchase operation was part of MAS' efforts to re-channel liquidity from smaller off-the-run issues into benchmark bonds.

As at end-December 2000, the yields on the benchmark 5-, 7- and 10-year SGS bonds had fallen by more than 30 basis points to 3.44%, 3.78% and 4.09% respectively from the beginning of the year. However, the benchmark 3-month, 1- and 2-year yields ended the year higher at 2.48%, 2.57% and 2.90% respectively. (See Chart 32.)

Average daily SGS turnover for 2000 increased 58.0% from $516.1 million in 1999 to $815.3 million. Average daily repo turnover for 2000 more than doubled from $227.8 million in 1999 to $542.3 million. Gross issuance of treasury bills and bonds during the year amounted to $41.9 billion and $12.1 billion respectively. This brought total scripless SGS outstanding at end-2000 to $43.2 billion. The net increase in bond issuance was $6.7 billion, which increased total scripless bonds outstanding to $29.9 billion. Net issuance of treasury bills increased by $1.2 billion, bringing the total amount of treasury bills outstanding to $13.4 billion.

During the the financial year, the number of Primary Dealers increased from nine to 11, with Barclays Bank and Credit Suisse First Boston joining as Primary Dealers in June 2000 and February 2001 respectively. In March 2001, JP Morgan announced that Singapore would be the twenty-second country to be added to its Government Bond Index Broad (GBI Broad) with effect from 2 April 2001.

Singapore Dollar Corporate Bond Market

The Singapore Dollar corporate bond market continued to register strong growth. The total issuance of Singapore Dollar –denominated debt in 2000 was $14.4 billion, a 56.5% increase over the amount issued in 1999. (See Chart 33.) There was also greater diversity in the issuer base. While foreign entities, statutory boards and financial institutions continued to tap the Singapore Dollar corporate bond market, there was an increase in the range of local corporates entering the market. These local corporates were from industries such as the food, logistics, transportation and engineering industries.The total number of bond issues also increased from 216 in 1999 to 381 in 2000.

In 2000, a total of 23 foreign entities tapped the Singapore Dollar corporate bond market, raising a total of $2.6 billion, compared with only 17 in 1999. Statutory boards continued to be one of the major issuers in 2000, raising a total of $1.5 billion.

Asian Dollar Bond Market

The Asian Dollar bond market also experienced significant growth in 2000, with a total of 528 issues. This was an 87.9% increase over the 281 issues in 1999. Total issuance of Asian Dollar bonds increased by 250.5%, from $10.3 billion in 1999 to $36.1 billion in 2000. 93% was denominated in US Dollars, with the remaining 7% denominated in Hong Kong Dollars, Euro and Japanese Yen.