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.
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.
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.