The Singapore Government Securities
(SGS) market continued to grow, with total outstanding SGS growing
S$5 billion to S$63.1 billion at end 2003 (See Chart 6).
The gross issuance of SGS bonds rose
to S$9.6 billion in 2003, an increase of S$1.2 billion from
the previous year. With S$5 billion of SGS bonds maturing during
the year, net issuance amounted to S$4.6 billion in 2003.
Activity in the SGS market was also strong with average daily
trading volume rising to S$2.6 billion in 2003, an increase
of 30%. This increase largely reflected the sell-off in global
bond markets in the second half of 2003, with average daily
trading volume reaching a high of S$4.2 billion in July 2003.
This sell-off prompted a sharp rise in SGS outright trading
in the third quarter of 2003 with average daily volume rising
to S$3.9 billion, more than twice the average daily volume in
the previous quarter.
Trading in the SGS repo market continued to remain active with
average daily turnover sustained at S$2.5 billion (See Chart
SGS yields fell to historical lows in the middle of 2003. The
yields on 10-year SGS dropped to a low of 1.8% in May 2003 as
global bond prices were bidded up sharply on the back of concerns
over the war in Iraq, the impact of SARS and the poor economic
Following developments in the global bond markets, a sharp sell-off
in the SGS market in July led to a steepening yield curve (See
Chart 7). Global bond yields began to back up significantly
in the latter half of 2003, driven by positive economic data,
the rally in global stock markets, and expectations of a turnaround
in the interest rate cycle.
Enhancing Risk-focused Supervisory Approach
Box 1 Fostering a Sound and Progressive
Financial Services Sector