Money Market Singapore 2013

Money Markets

Treasury Dealing Report

Executive summary

1. This report analyses and forecasts the past, present and future of Singapore’s money market situation. The first part shows the behaviour of the interest rates in Singapore for the past 3 years, highlighting the reasons that affect the SIBOR.

2. Secondly, it expresses our views and forecasts the behaviour of Singapore’s money market over the next six months. It focuses on the identification of the factors that affect the interest rates and outlines the most probable result.

3. The money market strategies highlighted in this portion of the report explains how the bank is going to achieve maximum profits, in view to the forecasted information in the previous segment.

4. Using the different strategies to maximize profits, the bank has to deal with different risks and problems will arise. We highlight and explain these risks and problems that may surface while implementing these strategies

The Past Behaviour [The market view]

The Singapore interbank offer rate (SIBOR) is a measure of cost of borrowing the Singapore dollar in the interbank market, set by the Association banks of Singapore, based on a daily reference rate that banks in Singapore offer each other for lending of unsecured funds.

Fig.1.0

SIBOR rates for the years 2010 to 2013

                                                          Fig. 1.1

Figure 1.0 show SIBOR rates decreasing since 2010. This is further shown in figure 1.1 where the rates for 1mth and 3mth SIBOR have fallen from 44 basis points (BPS) and 69 BPS in January 2010 to 33 BPS and 39 BPS in August 2013. For the past few years, the SIBOR has been fluctuating but there is a noticeable decreasing trend.

When SIBOR increases, lending banks think general interest rates are increasing and the lending environment is riskier, vice-versa.

External forces may also affect the SIBOR. We see a steep fall in interest rates in the middle of 2011. This is due to the...