The Monetary Authority of Singapore


The development of debt markets in Singapore has been one of the cardinal constituents of the Monetary Authority of Singapore ( MAS ) ‘s efforts to heighten Singapore ‘s function as an international fiscal centre. This has led to a series of bold reforms, including the liberalisation of the Singapore dollar and the development of Singapore into a hub for the issue, set uping and trading of debt securities. The debt markets in Singapore are made up of three major sections: Singapore authorities securities ( SGS ) market, the Asiatic dollar bond ( ADB ) market, and the Singapore dollar corporate bond ( SDCB ) market. Despite the fact that the authorities has run budget excesss since the 1980s and maintains immense militias, the SGS market remains the biggest section of the debt markets in Singapore. The ADB market, which involves bonds denominated in non-Singapore dollars, is the 2nd largest even though it has been promoted by MAS since 1971 to transform Singapore as a fiscal centre.


1971 – ADB ( Asian Development Bond ) introduced by Singapore. Since its origin in 1971, the ADB market has grown quickly, although the degree of activity fluctuates from twelvemonth to twelvemonth in response to demand for financess by foreign issuers. ADB was exempted from keep backing revenue enhancement. Banks were given a concessionary revenue enhancement rate of 10 per centum on income derived from ADB.

from set uping such bonds

  • 1987 Move to scripless, book-entry system in 1987 taking to improved colony system.
  • 1989 MAS began to advance SDCB ( Singapore dollar corporate bond ) market actively. Consequently it has experienced phenomenal growing since 1989.
  • 1998: , Prior to 1998, Singapore ‘s bond market was little and undeveloped. Back so the longest-dated SGS was merely 7 old ages.The Singapore Government ran budget excesss and had no demand to raise financess in the capital markets. Singapore Government Securities ( SGS ) were issued chiefly to run into Bankss ‘ demand for liquid assets for statutory demands. As a consequence, the SGS market was comparatively little and its secondary market inactive. In the absence of a liquid benchmark output curve, the private sector was loath to tap the debt market, with most corporations trusting on bank adoptions and equity to run into their support demands.

In February 1998, MAS embarked on a series of steps to develop Singapore ‘s bond market. Some of their aims were:

  • to make a believable authorities benchmark output curve to promote private sector issue ;
  • to ease issuers, both domestic and international, to both the primary and secondary markets ;
  • to set up the physical substructure to ease glade and colony of SGS and corporate bonds on a DvP footing.

MAS tried to carry through these aims by presenting the Qualifying Debt Securities ( QDS ) . QDS are debt securities well arranged by fiscal establishments in Singapore. Fee income earned by fiscal establishments which arrange QDS were exempted from revenue enhancement. In add-on, involvement income earned by fiscal establishments and corporations from keeping the QDS enjoyed a concessionary revenue enhancement of 10 per centum. Trading income earned by fiscal establishments was besides be taxed at 10 per centum. Furthermore, involvement income earned by non-residents with no lasting constitutions in Singapore will be exempted from keep backing revenue enhancement.

From August 1998, Singapore actively encouraged the development of the Singapore dollar corporate bond market. As a consequence, this market has shown phenomenal growing, with engagement from a broad scope of issuers: foreign entities, statutory boards, government-linked companies and local corporations. Some of the steps taken included:

  • heightening the deepness and comprehensiveness of the SGS market by increasing the issue volume, increasing the figure of primary traders and widening the riskless output curve with regular auctions of longer-term ( up to 15 old ages ) SGS ;
  • lifting of size limitations of repo trading and running of a SGS repo installation for primary traders to cover their short places in benchmark issues originating from their market devising activities ;
  • broadening the quasi-government bond sector by promoting statutory boards to publish bonds ;
  • liberalizing the SGD non-internationalisation policy and leting foreign entities to publish SGD-denominated bonds ; and
  • upgrading the bond glade and colony system of Singapore cardinal depositary, CDP, to enable RTGS and full DvP for SGD bonds.

In October 1998, Port Authority of Singapore issued 5 twelvemonth bonds. This was portion of authorities ‘s attempt to present new debt to develop bond market. The first 10-year authorities bond issue was besides done to widen the output curve ( beyond the so longest-dated 7 twelvemonth issue ) .

1999: In February, Housing Development Board issued 5 twelvemonth bonds. In the 1999 budget, MAS introduced the Approved Bond Intermediary ( ABI ) strategy. ABI position was given to fiscal establishments, which had debt inception and capablenesss in Singapore. All debt securities managed by fiscal establishments with ABI position ( or ABIs ) were treated as QDS. The strategy provided ABIs with greater certainty when covering with clients in footings of eligibility for revenue enhancement freedom. Before the debut of the ABI strategy, each dealing was assessed on a case-by-case basis.The 1999 budget extended revenue enhancement freedom from keep backing revenue enhancement, introduced in 1998, to non-residents who have lasting constitutions in Singapore, provided that non-residents do non utilize financess from Singapore operations to buy the QDS.

Subsequently in July, Land Transport Authority besides issued 10 twelvemonth bonds. In November, MAS revised the notice issued earlier in August 1998 to open up Singapore dollar bond market to foreign issuers. Its chief points were:

  • if the Singapore dollar returns from bond issue are to be used outside Singapore, they must be converted or swapped into foreign currency before remitting abroad ;
  • the barter leg of the above dealing is exempted from the hard currency and MLA demands and from revenue enhancement ;
  • there is no minimal size demand ( the lower limit issue size was S $ 100 million when Notice 757 was foremost issued ) ;
  • there is no limitation on the recognition evaluation of issuers ; and
  • if financess raised are for usage in Singapore, issues for non-bank non-residents do non necessitate anterior MAS blessing.

The Singapore dollar 3-month involvement rate hereafters contract were introduced on the Singapore Exchange. MAS besides lifted all limitations on Singapore dollar OTC ( over the counter ) involvement rate derived functions such as involvement rate barters, frontward rate understandings, involvement rate options and barter options.

2000: In 2000 the entire issue of the SDCB was merely 26 per centum of the entire SGS issue. To ease the development of structured merchandises as an alternate signifier of funding, guidelines on the capital intervention for recognition derived functions were introduced in 2000. These were:

  • all benchmark issues will be at least S $ 2-2.5 billion in size.
  • offshore Bankss were allowed to prosecute in repo without size limitation, raising the bound of S $ 20 million set in November 1999.
  • term contrary repo minutess ( or loans taken by Bankss utilizing SGS as collateral ) were made eligible for up to 5 per centum points of the MLA ( Minimum Liquid Asset ) demand.

In November 2000, MAS took an unprecedented measure by transporting out its ain SGS repo programme. This was aimed at re-channeling liquidness from off-the-run issues into larger and more liquid benchmark bonds.

In December 2000, MAS allowed non-residents to borrow Singapore dollars in the repo market without size limitation, provided that the financess are to be used for investing in inshore assets. As a consequence, the repo turnover has grown quickly since the center of 1990s ( See Figure 1 ) . The growing of the repo dealing has, in bend, facilitated a more active trading of the SGS and improved liquidness in the hard currency bond market.

2001: The SGS still dominates the debt markets in Singapore, with the entire gross issue in 2001 amounting to some S $ 58.6 billion ( S $ 44.4 billion for exchequer measures and S $ 14.2 billion for bonds ) . This brought the entire SGS outstanding at terminal of 2001 to S $ 58.6 billion. In 2001, entire issue of the ADB was S $ 50.0 billion, an addition of 39 per centum over 2000. In 2001, entire issue of the SDCB was S $ 22.0 billion, which represents 38 per centum of the entire SGS issue. In the 5-year bond auction in 2001, a new benchmark size of S $ 3.4 billion was established in response to market demand. Besides, 2001 witnessed the launch of a 5-year Singapore authorities bond hereafters contract by the Singapore Exchange and the issue of a 15-year SGS bond. These two developments should assist hike trading of the SGS in the secondary market and ease the issue of longer term SDCB.

Singapore ‘s SGD Debt Market ( Outstanding )

2002: In January 2002, MAS introduced the SGS eApps installation, an internet-based platform that facilitates more effectual communicating between primary traders and MAS. With consequence from 26 January 2002, the minimal denomination for T-bills in both primary auction and secondary market trading was lowered from S $ 10,000 to S $ 1,000. This move was aimed at doing SGS more accessible to the puting public and therefore broadening the SGS investors ‘ base.

In continuance with guidelines on the capital intervention for recognition derived functions introduced in 2000, guidelines on asset-backed securities for Bankss were introduced in 2002 to ease the development of structured merchandises as an alternate signifier of funding. To turn the investor base, investing guidelines for insurance companies were besides introduced, leting them to put in recognition derived functions for hedge and portfolio direction intents.

The CMBS market in Singapore has taken off in a large manner with the Real Estate Investment Trust ( REIT ) securitisation industry. A REIT is an entity that owns and operates income bring forthing existent estate such as flats, shopping Centres, offices, and hotels. The first REIT was listed on the Singapore Exchange ( SGX ) in 2002.

2004: Structured debt made up about 60 % of entire SGD debt issues in 2004. It included a broad scope of merchandises such as plus securitised debt, recognition linked debt, equity linked debt, exchangeable debt and other constructions including entire return notes and scope accrual notes ( see Chart E ) . This signals an addition in the degree of edification and hazard appetencies of the local investor base, a necessary ingredient in developing the comprehensiveness of our debt market.

Asset securitised debt made up more than half the structured SGD debt issues in 2004. SGD-denominated fixed income securities issued through SPVs has increased significantly from doing up merely 30 % of the debt issued in 2001 to over 47 % in 2004 ( as shown in Chart D ) . The market besides saw the debut of chief protected recognition loanblend merchandises uniting debt and equity.

2005: In an advanced securitisation trade in April 2005, Singapore supported the launch of an SME ACCESS Loan Scheme which enabled SMEs to tap the capital market via plus securitisation. By pooling together a well-diversified portfolio of SME credits, the strategy generated some S $ 300 million worth of SME loans for securitisation. Similar securitisation of SME loans have been seen in the Nipponese and Korean markets to great success every bit good.

By 31 Mar 05, there were 5 listed REITs deserving S $ 10.6 billion. This included Singapore ‘s first cross-border REIT which has underlying belongingss in Hong Kong. As REITs are required to administer at least 90 % of their income to investors, some have started to securitise their belongings through CMBS minutess to raise capital to fund more belongings acquisitions for their REIT. This has farther supported the growing of the plus securitisation market in Singapore.

Post 2005: The authorities has started utilizing the Public Private Partnership ( PPP ) attack of leting the private sector to offer for and put to death the design, edifice and operating of large-scale public undertakings. With this attack, the private sector is responsible for set uping funding for the undertaking, adding to the demand for bond issues and increasing the pool of assets available for securitisation. Given the big graduated table of most PPP undertakings, funding is normally required over a longer-term with the debt capital markets playing a important support function.

Singapore is besides actively involved in regional enterprises such as the Asiatic Bond Market Initiative ( ABMI ) . For illustration, it co-chairs the ABMI working group on recognition evaluation. Joint attempts to ease cross boundary line trading and investing within the part is good for local bond market development as it increases the pool of investors and liquidness.

Structure of the SGS Market

MAS, moving as financial agent for the authorities, issues three-month exchequer measures hebdomadally, while annual exchequer measures, every bit good as two, five, seven, and 10 twelvemonth bonds are issued on a regular basis.

Although Singapore has systematically run financial excesss, it continues to publish big sums of authorities debt securities to develop the necessary benchmark output curve for the pricing of Singapore dollar corporate bonds. Traveling frontward, Singapore has to postulate with the permeant & A ; lsquo ; original wickedness ‘ job, which is the inability to pull nonresidents to put in local currency bonds. In fact, the long-run chance for its corporate bond market hinges critically on how good the city state addresses the causes that can take to the & A ; lsquo ; original wickedness ‘ job.

Consequence of all the reforms

The scope of steps taken to develop the SGS market has been successful in set uping a more liquid benchmark output curve. As a consequence, our authorities bond market has grown well in size, deepness and liquidness. This has resulted in SGS being included in JP Morgan ‘s World Government Bond Index every bit good as Lehman Brother ‘s Global Aggregate Index. In January of 2005, Singapore became the first Asiatic state outside of Japan to come in the widely-followed Citigroup World Government Bond Index, signaling the suitableness of SGS for planetary investors.


The Singapore debt market development experience offers several valuable lessons for other states, like India, which are endeavoring to construct their ain bond markets.

First of all, developing an active and liquid bond market is an backbreaking undertaking that requires measures that at the same time combats all primary and subsidiary constituents of the market. Second, the authorities does non necessitate to run financial shortages in order to develop the authorities bond market. And in instance of state like India which already runs in immense financial shortages publishing authorities bonds is a necessity. Finally, success in developing the bond market requires close coaction between authorities and the fiscal industry. In the preparation and execution of bond market reforms, Singapore adopted the advisory method of actively seeking industry positions. Constructive duologues and changeless feedback Sessionss helped regulators guarantee that their policies efficaciously implemented and all right tuned for maximal consequences.