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SORA Transition Draws Closer

SINGAPORE

Singapore's Steering Committee for SOR & SIBOR Transition to SORA has announced the latest steps to transition to SORA by end of 2021, according to Bloomberg reports.

  • There will be three initiatives enacted to facilitate price discovery across longer tenors, and support further growth of SORA markets:
  1. Extending central clearing of SORA derivatives for transactions of up to the 21-year tenor, from the 5-year tenor currently.
  2. Expanding the Monetary Authority of Singapore (MAS) SORA derivatives auction parameters to cover more key industry participants, and extend transaction tenors to 20-years, up from 5-years currently.
  3. Expanding the MAS SORA Floating Rate Notes (FRN) program to include 1-year and 2-year tenors, from the 6-month tenor currently.
  • The committee also reaffirmed its previous industry guidance for lenders and borrowers to cease the use of new SOR-linked cash market products by end-April 2021.
  • The committee noted that while the proposed extension for LIBOR discontinuation by ICE Benchmark Administration will allow more time for the transition of legacy contracts, U.K. and U.S. authorities have continued to stress that the use of LIBOR in new contracts is to cease as soon as possible.
  • On January 8 UOB announced that it had successfully priced capital securities with a reset coupon rate that references the SORA-OIS rate, which was the first in Singapore. The issuance was seen as a step forward to promote the adoption of a SORA-based pricing benchmark in the SGD bond market, and part of broader industry efforts to develop deep and robust Sora-based cash and derivatives markets. The reset coupon rate of UOB's perpetual, non-call five-year additional Tier 1 securities on the first call date will reference the five-year Sora-OIS rate, instead of the five-year SOR interest rate swap (IRS) that had been the benchmark reference rate in the market.