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SGD interest rates have eased over the past week from what DBS called "overly stretched levels". 2-year SOR swaps have fallen by about 10bps to 0.44%, retracing about half of the increase since the start of February. Contributing factors include expectations of improved liquidity and some pre-positioning ahead of the MAS's biannual statement release April 14. While the MAS is not expected to tweak its policy settings, a shift towards a better outlook could portend an October move.

  • DBS research says there is evidence of a Singapore premium that has worked its way into the longer tenor Singapore government securities. Some of this is attributed to several long tenor SGS issuances (15-year ,10-year and 20-year in April, June and August respectively). Taking the 1-year tenor as a guide, the SGS-SOR spread (defined as SGS yield less SOR) is around 8bps. However, in the longer tenors (15-year to 30-year), this premium hovers between 15-22bps, an excess of around 7-15bps. DBS says "We suspect that this premium will linger until there is greater clarity on net SGS issuances (Market Development and Infrastructure). "
  • Fig.1: SGS v SOR

Source: DBS

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