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Modest Recovery in 2003
Financial Market Activity
Rise in Asian Dollar Market Lending . Box 12 – A Robust Financial System
Healthy Growth in Corporate Debt Market . Active Trading in Equities and Futures Market
Vibrant Treasury Market . Box 13 – The Singapore IPO Market
Mixed Performance for Insurance . Box 14 – Bank Loans to HDB Flat Buyers
Deepening Singapore Government Securities Market
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 6).

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 outlook.

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
Enhancing MAS’ Supervisory Capabilities
Box 2 – Stress Testing of Life Insurers
Box 3 – Streamlining Inspection Function
Thematic Inspections to Improve Surveillance