Monetary Authority of Singapore Annual Report 2010/2011
Our Work

Enhancing the Repo Facility

MAS had previously operated the MAS Repo Facility (MRF), which allowed Primary Dealers (PDs) to borrow SGS on an overnight basis from MAS' portfolio of SGS. An important enhancement was introduced in 2010 which allowed MAS to create SGS bonds on-demand for the purpose of the repo facility (the Enhanced Repo Facility or ERF). MAS lends these bonds on an overnight basis to SGS PDs, and destroys or redeems them when they are returned.

The ERF has given PDs greater certainty in obtaining specific SGS bonds. As a result, they are more confident in making markets to their customers and also do not need to hold a full suite of SGS bonds to make markets effectively. Similarly, MAS does not need to hold as large an inventory of SGS bonds to operate the repo facility. As PDs and MAS have freed up their holdings of SGS over time, the market free float has increased, allowing more SGS bonds to reach genuine end-investors. Above all, by removing issue-specific constraints in the SGS market, the ERF has improved the pricing efficiency and smoothened out the yield curve, which has enhanced SGS functioning as a price discovery mechanism for corporate pricing.