View Full Version : Why is sibor increasing when Fed not making any move?
Anyone? Why sibor is moving aggressivEly? Collusion?
Finding it very fishy to me too........
Are banks really lending to each other at SIBOR rate now?
If not, how they determine the SIBOR rate now and why it increased so fast?
I heard some people saying that banks nowaday do not borrow through interbank and hence SIBOR not really used any more, is this true? In fact, SIBOR should actually be fixed deposit rate + a spread which banks then lend to each other, hence if fixed deposit rate didn't increase, why SIBOR is increasing by so much within such a short time?
Can MAS do their job and please clarify and investigate?
Currently, I understand (according to some record I have) as of 1 March 2015, DBS' FHR = 0.4%, 3M-SIBOR = 0.785%, so the spread is 0.385%. Let's see whether this spread widen further or not.................
If it widen further, then even more FISHY FISHY!
Anyone? Why sibor is moving aggressivEly? Collusion?
One of the reason is sgd depreciation ( against USD ). The current sudden sibor jump was almost single handedly triggered by the MAS "unexpected" move last month.
Yes, people are floating such reason, but I don't buy this reason, seems more like an excuse to me.........
Really, to think about it, for SGD loans, the big local banks obtain their SGD from depositors via fixed and savings/current accounts. They then loan out to other banks at the so-called "SIBOR" rate. Thus, we can obtain the link that:
SIBOR approximately = fixed deposit rate + spread
The spread is the profit to the banks.
The local banks could also loan out the money directly to their customers directly using SIBOR rate + loan-spread, thus again they earned the spread + loan-spread.
As such, we would expect that for SIBOR to increase by a lot, there needs to be a corresponding increase in fixed deposit rate.
If there isn't, then we should be asking why, and it seems like a case where banks are profiteering (just like the petrol companies jacking up prices by much more than the increase in petrol duty increase)!
Hence, saying that SIBOR increase because SGD depreciate against USD is just an excuse? What has SIBOR to do with USD? I don't believe there is any direct link.
Obviously, some people will say there is relationship, because some people will convert SGD to USD. That makes sense, but won't that also means there is reduction in SGD and hence fixed deposit rate should increase? Without corresponding increase in fixed deposit rate, that means there is no significant reduction of SGD in circulation, which means that SIBOR increase is not justified!
Isn't it more convenient for the banks to blame the govt and MAS (than themselves) for causing SGD depreciation which resulted in them increasing the SIBOR?
And MAS is going to take that lying down? I would really like to call out for MAS to clarify whether it is true that their causing SGD depreciation resulted in SIBOR increase? If MAS keep quiet means it is true?
This is like the petrol companies blaming the govt for the petrol price increase due to the increase in petrol duty? But hei, their increase is much more than the petrol duty increase inclusive of GST!!!!!!!!!!! :simmering:
One of the reason is sgd depreciation ( against USD ). The current sudden sibor jump was almost single handedly triggered by the MAS "unexpected" move last month.
proud owner
15-03-15, 19:40
IBOR = Inter Bank Offer Rate.
The S = Sing
The L = London
The H = HK
The T = Tokyo
it does not mean the currency. It only means the Center that the rate is fixed.
In SIBOR, there can be USD, SGD, or any cuurency.
So Sibor does not mean SGD Interbank offer rate ... it is Singapore Interbank offer rate.
Banks do not lend to each other at SIBOR..but interbank market rates which is LOWER than SIBOR.
IBOR is fixed at 11am at each center.
What it means is that at 11am, at the WORST case, any (bank) can get a loan of their preferred tenor NO HIGHER than IBOR.
IBOR is used by banks to charge as BASE rates to the loans customers. Their customers will get IBOR + a spread predetermined depending on the rating of the customers.
When SGD weakens, against USD, we always say there is OUTFLOW, hence a shortage or demand for SGD.
That is why IBOR will be fixed higher.
However, as with any other businesses, the corresponding Deposit will be very slow to react.
When the IBOR goes up, the entire curve ( o/n to 12mth) move up in tandem.
But at the end of each trading day, when banks do their final balancing, they will need to either borrow or lend out O/N ( overnight ).
During the day, O/N can be trading at say 0.5 pct.
But at day end closing, it can close at 0.05 pct. But that would not bring the IBOR down the next day. This is just how it works.
Liquidity in the system does not really change. But the liquidity DURING THE DAY can be very very tight that results in the IBOR being fixed higher and O/N being traded up. But like i say, at the end of the day, the O/N can fall to very low when banks do their closings.
In many countries, their central banks allow banks to HOG funds and keep O.N balances at a high.
MAS does not allow that. MAS requires banks to cover their balances to as close to ZERO as possible.
WHY they tightness during the day, there are many reasons. Late payment, third arty payment etc. Or a genuine shortage in liquidity/outflow.
However if the IBOR continues to go up, the smaller or foreign banks who do not have as much access to funds will eventually raise their deposit rates.
Local banks have no issue with SGD liquidity.
But if we are talking USD, then local banks will lose out to foreign banks as their access to USD is not good.
When I refer to SIBOR here, I am referring to SGD SIBOR.
There used to be another USD SIBOR here which has been discontinued because it doesn't make sense here.
Only Singapore banks can determine SGD rate since they have large and cheap source of SGD funds from Singapore depositors.
An it is obvious that Singapore banks predominately lend to each other in SGD (as they have largest and cheapest source of SGD). For other currencies like USD, the Singapore banks can borrow from foreign banks, particularly from US banks where they have avenue to cheaper funds (and hence at lower rates to them).
If according to what you said:
"Banks do not lend to each other at SIBOR..but interbank market rates which is LOWER than SIBOR. "
then, the issue become even much murkier because then, how is SIBOR determined by the banks?
The banks can just anyhow quote a figure higher than IBOR, and increase it by a big amount arbitrarily when they can find excuses like "SGD depreciation" etc in order to profiteer?
IBOR = Inter Bank Offer Rate.
The S = Sing
The L = London
The H = HK
The T = Tokyo
it does not mean the currency. It only means the Center that the rate is fixed.
In SIBOR, there can be USD, SGD, or any cuurency.
So Sibor does not mean SGD Interbank offer rate ... it is Singapore Interbank offer rate.
Banks do not lend to each other at SIBOR..but interbank market rates which is LOWER than SIBOR.
IBOR is fixed at 11am at each center.
What it means is that at 11am, at the WORST case, any (bank) can get a loan of their preferred tenor NO HIGHER than IBOR.
IBOR is used by banks to charge as BASE rates to the loans customers. Their customers will get IBOR + a spread predetermined depending on the rating of the customers.
When SGD weakens, against USD, we always say there is OUTFLOW, hence a shortage or demand for SGD.
That is why IBOR will be fixed higher.
However, as with any other businesses, the corresponding Deposit will be very slow to react.
When the IBOR goes up, the entire curve ( o/n to 12mth) move up in tandem.
But at the end of each trading day, when banks do their final balancing, they will need to either borrow or lend out O/N ( overnight ).
During the day, O/N can be trading at say 0.5 pct.
But at day end closing, it can close at 0.05 pct. But that would not bring the IBOR down the next day. This is just how it works.
Liquidity in the system does not really change. But the liquidity DURING THE DAY can be very very tight that results in the IBOR being fixed higher and O/N being traded up. But like i say, at the end of the day, the O/N can fall to very low when banks do their closings.
In many countries, their central banks allow banks to HOG funds and keep O.N balances at a high.
MAS does not allow that. MAS requires banks to cover their balances to as close to ZERO as possible.
WHY they tightness during the day, there are many reasons. Late payment, third arty payment etc. Or a genuine shortage in liquidity/outflow.
However if the IBOR continues to go up, the smaller or foreign banks who do not have as much access to funds will eventually raise their deposit rates.
Local banks have no issue with SGD liquidity.
But if we are talking USD, then local banks will lose out to foreign banks as their access to USD is not good.
proud owner
15-03-15, 23:27
for SGD SIBOR fixing, a panel of banks, made up of all the local banks + a few foreign banks ( if i remember correctly , CITI, DEUTSCHE, BNP, HSBC, SCB) will submit their OWN SIBOR rates for each tenor.
The publishing portal, Reuters, Bloomberg, etc will take the Average of these various fixings.
The average will then be the official SGD SIBOR FIXING RATE for that day.
This is how it works for all IBORs around the world.
These fixing banks contribute their fixing rates according to their internal funding needs.
If A bank needs funds in 3mth, A will fix higher. B with no special needs may fix more closer to the price at the point in time in the market.
That is why the average is used.
if more than 50 pct of the fixing banks fix a particular tenor higher, then the average for that tenor for that day will be higher..
so can banks cheat ?
in the past YES ... but now NO.
remember the big hoo haa a couple of years bank of the LIBOR USD fixing saga ?
banks manipulated ... and many traders were fired, banks fined by central banks.
so i would say , now the fixing done by fixing banks are truly to their internal funding needs.
so if SIBOR goes up every day ... then truly there is a shortage of liquidity in the system.
a situation only the central bank can neutralize... by injecting funds... otherwise rates will continue to go up.
That is to say that USD/SGD going higher ( weaker SGD) is indeed the reason behind the higher rates
This is something alot of people misunderstood. Although SIBOR historically has a close relation to the FED funds rate, it's also closely related to the USD. In the past, you can say that only Singapore banks are participating in the SIBOR rate panel. Today, there are 12 banks in the panel (down from 17 a couple of years ago). What they would do is, on a daily basis, contribute to the panel a rate they think they would have to pay to borrow money from one another (interbank). After the LIBOR incident, the panel is more closely watched by MAS than ever so there's no chance of a collusion. Then, Thomson Reuters would chop off the top and bottom 25% to take the average of the remaining. So what you would get is a rate set by a minimum of 6 banks. The strongest bank in SG with access to cheap funds in SG will obviously get chopped off (DBS maybe?). The rest would have to borrow at a higher rate. Banks such as Citibank with great exposure to USD funds would obviously be charged a higher rate than say UOB. So a stronger USD and with the anticipation of a higher FED rate would cause the 3mth SIBOR to go up higher. Who would want to lend you money at current rate when they know the FED is going to hike rates in the next few months? Even FD and savings rates are going higher now, only a fool would lend you money at 0.25% interest.
There's another reason mentioned by proud owner above is the liquidity issue caused by outflow of funds. Banks are now more cautious in anticipation of MORE outflow since the USD is appreciating against the SGD and with Treasury yield going higher.
What regulations now existed that can ensure that the banks can't cheat on SIBOR?
You said that:
so if SIBOR goes up every day ... then truly there is a shortage of liquidity in the system.
However, I would tend to believe that the below is better reflection of real shortage of liqudity:
so if SGD Fixed Deposit Rate goes up every day ... then truly there is a shortage of liquidity in the system.
I would rather look at the "Fixed Deposit Rate" rather than the "SIBOR" rate as it is clear from how SIBOR was determined that banks can easily cheat by colluding as a group (just like petrol companies)................
People have been saying that petrol companies are operating like cartel and jacking up prices together, and so far no concrete action has been taken.
Will it be the same for the banks as well?
for SGD SIBOR fixing, a panel of banks, made up of all the local banks + a few foreign banks ( if i remember correctly , CITI, DEUTSCHE, BNP, HSBC, SCB) will submit their OWN SIBOR rates for each tenor.
The publishing portal, Reuters, Bloomberg, etc will take the Average of these various fixings.
The average will then be the official SGD SIBOR FIXING RATE for that day.
This is how it works for all IBORs around the world.
These fixing banks contribute their fixing rates according to their internal funding needs.
If A bank needs funds in 3mth, A will fix higher. B with no special needs may fix more closer to the price at the point in time in the market.
That is why the average is used.
if more than 50 pct of the fixing banks fix a particular tenor higher, then the average for that tenor for that day will be higher..
so can banks cheat ?
in the past YES ... but now NO.
remember the big hoo haa a couple of years bank of the LIBOR USD fixing saga ?
banks manipulated ... and many traders were fired, banks fined by central banks.
so i would say , now the fixing done by fixing banks are truly to their internal funding needs.
so if SIBOR goes up every day ... then truly there is a shortage of liquidity in the system.
a situation only the central bank can neutralize... by injecting funds... otherwise rates will continue to go up.
That is to say that USD/SGD going higher ( weaker SGD) is indeed the reason behind the higher rates
proud owner
15-03-15, 23:47
I said earlier .... many traders all over the world have been fired, banks fined, Singapore included.
and being the most Kiasu country in the world, MAS is very very strict on this, NO WAY bank will cheat ... over fixing.
Yes you can believe however you like , about using deposit rate to determine the trend ...
but banks use the lending rate ... since you are not a bank your believe is as good as useless ...
crappy banks with crappy rating will need to pay higher to get their funds.
if their deposit rates are higher, does it really mean there is a shortage ?
the day the better banks start to raise their deposit rates , you will cry what their lending rates will be ...
gsmsimmax3
15-03-15, 23:51
Attachment show how the SIBOR rates are fixed.
In the past may be able to monkey around..now not so easy to collude..
10030
proud owner
16-03-15, 00:02
In feb, in another thread, i mentioned that if Khaw is preemptive, some cooling measures will be removed SOONER than many anticipated.
I am not sure if i mentioned April /May ... just a hunch ...
The way, private prop resales are going ( almost dead), increase mortgagee sales, bigger quantum cut loss transactions, higher rates, ... my feel of a preemptive move ( removal of some measures) is getting stronger ...with each increase in rates by the banks ...
Who print money in Singapore ? MAS or Bank.
Who decide interest rate ? MAS or Bank.
Who control who ? MAS control Bank or Bank control MAS.
Who is the World currency ?
Who control the World interest rate ?
smellyfish
16-03-15, 09:37
agree with Teddybear. interest rate going up should first be affecting the deposit rates, not the lending rates. Or rather, deposits rates should be moving up first, forcing lender to lend at higher price to cover higher cost. not moving deposit rates up first but moving lending rates is tail wagging the dog.
Let's have the understanding that "MAS is very strict on everything", but that DID NOT make DBS make proper compensation to their SG customers involving the Lehman case (in contrast to DBS' HK customers), so STRICT BUT USELESS for what?
And, from all the explanations given by you and the rest of forumers here, I still could not see effective measures that can prevent banks from cheating on SIBOR rate and manipulating it!
In fact, I see more loopholes that make it easier for banks to exploit!
Yes, banks use the lending rate, and it is to their advantage, and despite all the loopholes, MAS does not see it fit to plug the loopholes?
"the day the better banks start to raise their deposit rates , you will cry what their lending rates will be..." - Yes I believe so, that is when the banks' customers had already been squeezed dried and feeling so short-changed such that their customers started shifting their SGD to other currencies and there is a real VERY VERY tight SGD squeeze then banks is willing to raise deposit rates right? :gun4:
I said earlier .... many traders all over the world have been fired, banks fined, Singapore included.
and being the most Kiasu country in the world, MAS is very very strict on this, NO WAY bank will cheat ... over fixing.
Yes you can believe however you like , about using deposit rate to determine the trend ...
but banks use the lending rate ... since you are not a bank your believe is as good as useless ...
crappy banks with crappy rating will need to pay higher to get their funds.
if their deposit rates are higher, does it really mean there is a shortage ?
the day the better banks start to raise their deposit rates , you will cry what their lending rates will be ...
Let's be clear about this (from a theoretical standpoint): SGD SIBOR has NOTHING TO DO DIRECTLY with USD!
USD circulation can have a very tight sqeeze but as long as every Singaporeans keep their money in SGD and deposit in the banks and/or MAS continue to print SGD, SGD interest rate can hit the floor of ZERO!
From your explanation, I see more loopholes in how SIBOR was calculated!
They are:
1) Only 12 banks determined the SIBOR rate! (so few, isn't it easier to manipulate?)
2) Please read through the statements you mentioned 10 times:
"on a daily basis, (the banks) contribute to the panel a rate they think they would have to pay to borrow money from one another (interbank)..."
Wow! SIBOR is pegged to a rate the banks "THINK" and not what they actually paid for for borrowing SGD currency?
If the banks want to engage in manipulation, then it is super easy!
Every day, the banks can "THINK" they want/need to pay higher interest rate to borrow SGD currency, without actually paying it (to other banks and their customers via bank fixed deposits and account deposits), and VIOLA(!), all their customers will have to pay more interests to them due to earlier LOANS! Yet They don't have to pay a single additional cent to "THINK of paying more to borrow SGD" in order to earn more interests!!!!!!!!!!!!!!!!!!!! Every day, continue to "THINK" that SIBOR need to go higher and viola, SIBOR will go higher and they can continue to EARN BIG BUCKS for THINKING without actually paying more interests to other banks and their customers!!!!!!!!!!!!!!!
3) Response to your statement on: "After the LIBOR incident, the panel is more closely watched by MAS than ever so there's no chance of a collusion."
Watched yes, but the way SIBOR rate has been calculated means that MAS can watch 24 hours a day and 365 days a year and still MAS still can't prevent the banks from manipulating SIBOR!
The best way is for MAS to mandate a change of how SIBOR rate is calculated (instead of calculating SIBOR rate based on what the banks "THINK of a rate" they are willing to pay)!
Since we know that theoretically, SGD SIBOR should be approximately SGD fixed deposit rate + a spread (profit that banks can earn above fixed deposit rate), MAS can start off from this concept! MAS should remember that a fair SIBOR rate is one based on what the banks actually paid and not based on "thinking"!!!!!!!!!!!!!!
4) Wow! SIBOR rate is only determined by 6 banks!!!!!!!!!!!!!!! Sign that SIBOR rate is REALLY EASY to manipulate indeed!!!!!!!!!!!
5) "Who would want to lend you money at current rate when they know the FED is going to hike rates in the next few months? Even FD and savings rates are going higher now, only a fool would lend you money at 0.25% interest."
Yes, if indeed SGD rates are so high, who would want to deposit their SGD money into DBS that is paying 0.4% fixed deposit interest rate? Then why DBS still have so much deposits? As far as I know, DBS SGD FHR is still at 0.4%, haven't moved yet, so that more or less burst the myth that SGD FD rate has already gone up (when SGD SIBOR has already gone up by >0.5%)!!!!!!!!!!!
6) "There's another reason mentioned by proud owner above is the liquidity issue caused by outflow of funds. Banks are now more cautious in anticipation of MORE outflow since the USD is appreciating against the SGD and with Treasury yield going higher."
As I mentioned, SGD FD rate has bearly moved, meaning SGD outflow still negligible to cause SGD FD rate to move up, so why SIBOR moving up by so much within such a short time???! DBS FHR (pegged to 12M FD) still 0.4%, 3M-SIBOR now 1.0245%!!!!!!!!!!!!!!
This is something alot of people misunderstood. Although SIBOR historically has a close relation to the FED funds rate, it's also closely related to the USD. In the past, you can say that only Singapore banks are participating in the SIBOR rate panel. Today, there are 12 banks in the panel (down from 17 a couple of years ago). What they would do is, on a daily basis, contribute to the panel a rate they think they would have to pay to borrow money from one another (interbank). After the LIBOR incident, the panel is more closely watched by MAS than ever so there's no chance of a collusion. Then, Thomson Reuters would chop off the top and bottom 25% to take the average of the remaining. So what you would get is a rate set by a minimum of 6 banks. The strongest bank in SG with access to cheap funds in SG will obviously get chopped off (DBS maybe?). The rest would have to borrow at a higher rate. Banks such as Citibank with great exposure to USD funds would obviously be charged a higher rate than say UOB. So a stronger USD and with the anticipation of a higher FED rate would cause the 3mth SIBOR to go up higher. Who would want to lend you money at current rate when they know the FED is going to hike rates in the next few months? Even FD and savings rates are going higher now, only a fool would lend you money at 0.25% interest.
There's another reason mentioned by proud owner above is the liquidity issue caused by outflow of funds. Banks are now more cautious in anticipation of MORE outflow since the USD is appreciating against the SGD and with Treasury yield going higher.
Expressways also a lot of cameras (fixed and mobile) leh.
All watching 100% of the time. Very hard to speed nowadays...means no speeding?
One correction : SIBOR is collated and computed by ABS, not Reuters/bloomberg.
Teddy has a point: SIBOR fixing may not have collusion now, but it is not reflecting lending rate fairly. Nothing stops a foreign bank from submitting his SGD high borrowing cost, and nothing stops DBS's low borrowing rate from being removed as the process remove top/bottom by design, even though DBS's SGD volume can be much bigger than Citi's. It is true SGD funding cost is much higher for foreign banks.
Libor used to be fixed by BBA, now not any more. The new ICE Libor is trying to go to the route of "actual traded rates", that is much more fairer. MAS should look into that. ABS cannot be be the party that fix the rate and also profit from the rate. The conflict is inherent.
proud owner
16-03-15, 22:52
in the interbank market, the banks do not know WHO is lending and WHo is borrowing.
When setting SIBOR rate, say 3mth rate, the bank will have to first determine if they need 3mth funds.
If yes, and need a lot, they will set it higher. Assuming mkt price is 1.125 - 1.00 ( lending at 1.125pct , borrowing at 1.00 pct), chances are the bank will set their 3mth SIBOR as 1.25 pct.
As the lender is unknown, there is a chance that even if the bank hit the lender at 1.125 pct, he MAY not get his funds (due to credit ) or the amount that he needs.
If the bank has excess 3mth funds, and he is lending in the market at 1.125pct, he would then set his 3mth SIBOR as 1.125pct ...
HOW TO CHEAT ?
before the trader submit the rates, it has to be vetted by a manager, CHOPPED SIGNED AND SEALED. EVERYTHING will be filed and kept for 7 years.
ANYTIME, MAS auditor can retrieve these and check...
proud owner
16-03-15, 22:55
there are only a handful of banks that qualify to set the SIBOR rates...
we may have 2 to 3 hundred banks in singapore... only those with a Full license can qualify.
you can count how many there are ..
just for my 2cents contribution:
http://www.cnbc.com/id/100497710#
read the last paragraph.
"But let's say it does work. What we have here is a functioning bank, a demonstration of how the basic infrastructure of banking is not built on a foundation of a bunch of cash that is then lent out. It's built on the loans themselves, with capital and reserves raised to meet regulatory requirements."
so to answer the question: does FD rate need to rise first, then SIBOR?
From my limited understanding, if the banks have enough capital/reserves, they can raise SIBOR rates wo raising FD rates, ie they dont need to raise FD rates to attract deposits to meet regulatory requirements.
FWIW, I have been trying to grasp the essentials of banking and credit creation, but it still continue to elude my grasp.
"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." Henry Ford
HOW TO CHEAT ?
That was not my point.
When BBA started Libor fixing, it was based on gentlemen's promise. Bank says. "I tell you, I think I can get loans for this maturity for a reasonable amount at this rate". There was not even a definition what "reasonable amount" should be. No one asked you to prove indeed you can/did get that rate. It's like a old Englishman's promise. The Lords have their words.
This is inherently not a sound system, based on promise. So when new generation investment bankers took over, they found opportunity to collude and profit from it. But even without the collusion (which now hopefully is gone), the system is never a fair or correct gauge of lending rate, because of the inherent flaw. There is no need to cheat, but no one needs to keep his promise as long as it is legal.
That's why when ICE took over Libor, it is moving towards actual traded rate fixings. That will be much more accurate to gauge the actual lending benchmark.
Question:
1) What is your definition of "CHEAT"?
2) What is "MAS auditor can retrieve these and check" against what?
I don't suppose MAS auditors are checking against what the banks "THINK" they can or want to pay a certain rate for some SGD fund (but NEVER really commit to the actual borrowing)?
3) Again, to be clear, we need to know what the manager vet and check against in your statement:
"...before the trader submit the rates, it has to be vetted by a manager, CHOPPED SIGNED AND SEALED. EVERYTHING will be filed and kept for 7 years. "
Without a fixed unmovable benchmark or reference, MAS auditors can check whatever they like but NO BANKS will be held accountable for what the banks "THINK"!
And obviously, it won't be surprising that their thinking will be in unison whenever it comes to raising SIBOR..... especially when there are good excuses, like Fed going to raise rates (but haven't actually did), just like they "THINK" they need to pay higher interest rates to obtain SGD borrowing because of SGD depreciation (but never actually pay that rate to obtain SGD borrowing because we can see that FD rate has not gone up right)? :rolleyes:
I don't believe MAS is so naive that they can't see the serious flaws with how SIBOR rate is being calculated now?
in the interbank market, the banks do not know WHO is lending and WHo is borrowing.
When setting SIBOR rate, say 3mth rate, the bank will have to first determine if they need 3mth funds.
If yes, and need a lot, they will set it higher. Assuming mkt price is 1.125 - 1.00 ( lending at 1.125pct , borrowing at 1.00 pct), chances are the bank will set their 3mth SIBOR as 1.25 pct.
As the lender is unknown, there is a chance that even if the bank hit the lender at 1.125 pct, he MAY not get his funds (due to credit ) or the amount that he needs.
If the bank has excess 3mth funds, and he is lending in the market at 1.125pct, he would then set his 3mth SIBOR as 1.125pct ...
HOW TO CHEAT ?
before the trader submit the rates, it has to be vetted by a manager, CHOPPED SIGNED AND SEALED. EVERYTHING will be filed and kept for 7 years.
ANYTIME, MAS auditor can retrieve these and check...
proud owner
17-03-15, 14:34
i was answering to Teddy ... when he kept saying banks can still collude .... when it comes to fixings...
I am confused, what is the contention again?
If SIBOR rates are going down, there is no collusion.
If SIBOR rates are going up, there is collusion.
proud owner
17-03-15, 14:45
if there are any traders in this forum ... they will understand how it works...
i cant explain well enough ...
all i can say is that the process is not as simple as it appears to layman ..
Traders trade on their FEEL of the market and which direction they THINK the trend will go. and thats how they take a position and make money for the bank ..
so please dont bang on the word THINK ... its much more to it ..
say you want to take a loan ...
Online .. say DBS, say housing loan at 1.3 pct for 3yrs..
can you commit that you will be able to get your loan at 1.3 pct ?
They bank may grant you 1.3 pct BUT not the amount you want ... based on your credit rating .. (TDSR example)
Do you then go ahead and purchase a property becos DBS online says 1.3 pct ?
No your cant
similarly ...
the market may be trading 3mth at 1.5 pct ... can any bank be sure they will get the AMOUNT they need at 1.5 pct ?
can any bank be sure the lender at 1.5 pct has credit lines for them ?
NO becos the market only shows rates never show who is lending ..
with these uncertainty .. banks can only THINK/GUESS the best rate that they are able to get the FULL AMOUNT they need and at what rate ..
to be that sure .. it has to be fixed HIGHER than market ..
If there is a small bank ... lending at 1.5 pct for say 100 mil ...
and 12 banks who needs funds at 1.5 pct ... if they all Borrow at the same time 11am (fixing time) .. do you think they can all get their money at the same time and same rate ?
NO WAY ..
SO if you are the banker fixing the rate will you fix it at 1.5 pct, taking into consideration of the above uncertainties ?
proud owner
17-03-15, 14:49
all i am saying is ... it is not easy ...
during the MAS investigation last year .. cellphone, emails, sms, etc ... everything was confiscated and thoroughly investigated ...
which trader would risk their career over a fixing ?
and what do they gain for doing that ?
I suppose because you are a trader, so you are not able to think out of the box? We are not talking about current system of how SIBOR is calculated, but what should be a fair system to consumers!
I believe amk has also highlighted the same point which I raised:
SIBOR figure is calculated not based on real borrowing costs that banks ACTUALLY PAID to borrow SGD, but some arbitrary number based on what banks "THINK" and submitted by them!
In your case, are you telling us that it is based on traded rates? BUT, SIBOR is not fixed based on traded rates! At a day, there may be many transactions at different costs, and is SIBOR is fixed at a rate MUCH MUCH higher than the highest traded rate by the banks? Wow! If that is true, then it really open more cans of worms! Consumers who have been sold that "SIBOR" is transparent and fair has been bluffed and cheated!
if there are any traders in this forum ... they will understand how it works...
i cant explain well enough ...
all i can say is that the process is not as simple as it appears to layman ..
Traders trade on their FEEL of the market and which direction they THINK the trend will go. and thats how they take a position and make money for the bank ..
so please dont bang on the word THINK ... its much more to it ..
say you want to take a loan ...
Online .. say DBS, say housing loan at 1.3 pct for 3yrs..
can you commit that you will be able to get your loan at 1.3 pct ?
They bank may grant you 1.3 pct BUT not the amount you want ... based on your credit rating .. (TDSR example)
Do you then go ahead and purchase a property becos DBS online says 1.3 pct ?
No your cant
similarly ...
the market may be trading 3mth at 1.5 pct ... can any bank be sure they will get the AMOUNT they need at 1.5 pct ?
can any bank be sure the lender at 1.5 pct has credit lines for them ?
NO becos the market only shows rates never show who is lending ..
with these uncertainty .. banks can only THINK/GUESS the best rate that they are able to get the FULL AMOUNT they need and at what rate ..
to be that sure .. it has to be fixed HIGHER than market ..
If there is a small bank ... lending at 1.5 pct for say 100 mil ...
and 12 banks who needs funds at 1.5 pct ... if they all Borrow at the same time 11am (fixing time) .. do you think they can all get their money at the same time and same rate ?
NO WAY ..
SO if you are the banker fixing the rate will you fix it at 1.5 pct, taking into consideration of the above uncertainties ?
Similar to LIBOR, banks can make MULTI-BILLIONS $$$ by colluding and fixing rates at higher rate than they should be, so the answer to your question is no brainer!
And traders and banks representatives would be smart enough NOW to talk face to face rather than email, SMS, talk over the phone knowing that they have been tracked and under surveillance right?
Your question is like asking us that Every one also know traders trade naked to "make" big money (by hiding losses) for the banks, why the they need to risk their career over this? What do they gain?
all i am saying is ... it is not easy ...
during the MAS investigation last year .. cellphone, emails, sms, etc ... everything was confiscated and thoroughly investigated ...
which trader would risk their career over a fixing ?
and what do they gain for doing that ?
proud owner
17-03-15, 15:07
it can be actual traded rates ... but not necessary .. really depend on your position and needs and amount..
IF all 12 banks needs funds .. and all went in to try to borrow ... it will push the rate even higher ...
If there was no requirement and just becos you said it needed to be real traded rates ... banks then went and borrow SOME just to satisfy you ... wouldnt that push the rate higher ?
is that what you want ?
IF you need 1 bil 3mths ... you will keep quiet about it .. and slowly try to cover that amount over the next days/weeks.. so at that least your average cost is better than going in and borrow at one go and see the rate run away ..
proud owner,
from your example given, is my understanding correct ?
only the most "desperate" bank will pay the SIBOR rate in order to have access to the funds.
the not so "desperate" banks will pay less than the SIBOR rate.
For example, Bank A have $120million to loan out.
Bank B requires $100million, so it will bid SIBOR high.
the SIBOR rate is set (after minus the top and bottom bidders).
Bank B then approach Bank A for the $100million, Bank B then pay SIBOR rate.
Bank A still have $20million leftover to be lend out. And if there is no other banks that are willing to pay the SIBOR rate, then Bank A has to offer a lower rate than SIBOR to attract the other banks.
proud owner
17-03-15, 15:11
yep ... i am sorry i am the stupid one ... you are the smart one ...your should get a job as a trader ... then you start to ask yourself those question ..
all i say is .. the way fixing is being done now .. it is not easy to collude ... but hey thanks for suggesting that they meet up face to face at 10.55 am so that they can fix the rate together at 11am ..
I am confused, what is the contention again?
If SIBOR rates are going down, there is no collusion.
If SIBOR rates are going up, there is collusion.
If one pays less interest and an appreciating property relative to others, there is no collusion. When one pays more interest and a depreciating property, it must be someone else's fault and sabotage.
We need to develop broadness of thought. Give a chance to everyone. Sometimes win, sometimes lose.
proud owner
17-03-15, 15:33
proud owner,
from your example given, is my understanding correct ?
only the most "desperate" bank will pay the SIBOR rate in order to have access to the funds.
the not so "desperate" banks will pay less than the SIBOR rate.
For example, Bank A have $120million to loan out.
Bank B requires $100million, so it will bid SIBOR high.
the SIBOR rate is set (after minus the top and bottom bidders).
Bank B then approach Bank A for the $100million, Bank B then pay SIBOR rate.
Bank A still have $20million leftover to be lend out. And if there is no other banks that are willing to pay the SIBOR rate, then Bank A has to offer a lower rate than SIBOR to attract the other banks.
Using your example ..
Assuming the 120 mil from A is bank fund .. ( can be trader's own trading position)
say at 10am .. B is bidding at 1pct A is lending at 1.25pct so the mkt price is 1.25 - 1.0 Thats all every trader will see/hear ... no mention of WHO on each side.
One wont know which has a better rating. Rating is important ...as it determines how easy to get funds.. If DBS is lending, OCBC and some kuching kurat bank are borrowing .. both take DBS at the same time ... DBS will be able to lend ocbc easier and more than the crappy bank ...
If nothing happens, the price remains at 1.25 - 1.0 pct ... till fixing time at 11am ..
How would you set the sibor now ?
Only A is lending, A (if A is a fixing bank) will set sibor as 1.25 pct ... is it traded ? NO ... so still A can fix sibor as 1.25 pct
The other banks, incl B (also a fixing bank ) will most likely fix his sibor contribution rate HIGHER than 1.25pct.. how much higher, depends on matter factors..
However, assuming before 11am... B becomes desperate and hit the lender A at 1.25 pct ...
Again assuming A is able to lend B the full 100mil ...
B MAy then set his Sibor rate as 1.28 pct. 0.03 pct more to cover cost.. and maybe a tiny margin.
A is now left with 20 mil .. hr MAY stay put at 1.25pct , he can move it higher to 1.28 or 1.3 pct and wait to see if there are other taker..
the price now becomes 1.30 - 1.20 till fixing time..
Again ... A may fix sibor as 1.30
others may fix their sibor as 1.33 ..
there are many scenarios
as there are as many ASSUMPTIONS.. like credit rating, amount available on each side , how many other parties need funds etc ..
all these are unknown..
if A now feels charitable .. he may choose to lend lower at 1.2 to the next guy for the 20 mil .. he may stay put at 1.25 or move it higher to 1.3 ..
its like buyer and seller ..
more seller in mkt now .. price will move lower ..
ASSUMING you selling your condo at 2mil ..
A buyer comes along, viewed your unit and bid 1.8 mil ..
You die die stick with 2 mil .. nothing goes thru ..
If buyer desperate for it (fund) he will hit you at 2mil
IF there are 2 buyers and 1 seller .. will seller move the price up ?
Isnt this the same situation when property prices was going up ?
Sellers keep changing their price..
Can you now CONFIDENTLY say you can get your condo at 2mil ? before you actually purchase it ?
No you cant .. the other buyer may beat you to it , or the seller raise the price ..
will you fix the SELLING SIBOR at 2mil ?
you wont...
any NO BRAINER will not commit himself and say YES I CAN GET IT AT 2MIL ..
First you mentioned abt bidding & lending being anonymous, then you mentioned abt ratings.
this part confuses me, if parties are anonymous, then how do the parties know whose rating is better or worse?
thanks for taking the time to explain
in financial crisis time, the opposite was happening. banks actually borrowed at very high rate, but they dared not say they were in trouble, so they all contributed a rate far lower than they really got. This was not collusion. This was mere acting in unison. :)
What is a "benchmark" ? It is meant to be an approximation. Self contribution has inherent problems, especially so when the contributing members are so few.
Although I must say the SIBOR today did not vary that much from market rates. Many foreign banks fund SGD through USD (SOR), rate itself aleady inherently higher. DBS pays deposit close to 0, but if it sees everybody takes higher rate, no reason for DBS not to make the profit, this is the very advantage of a local bank. It is the same for developer who acquires land at low price but sells at "market" price.
proud owner
18-03-15, 11:32
First you mentioned abt bidding & lending being anonymous, then you mentioned abt ratings.
this part confuses me, if parties are anonymous, then how do the parties know whose rating is better or worse?
thanks for taking the time to explain
Sorry i used trading terms ..
Bid = borrowing / buying
Offer = lending / selling
Due to banking secrecy act, be it a human broker quoting the prices or a trading platform, one will not know WHO is lending or borrowing, or its rating.
All one knows is the rate and the amount.
If i am borrowing, say 100 mil, i will be bidding say at 1.00 pct. If there is an offer (lender) say at 1.25 pct for 50 mil , thats all the info i have.
If i try to take ( borrow from him) 50 mil ( thats all he has, but not all i need), i MAY or MAY NOT get it at all.
If the lender's credit limit for me is fully utilized, i wont get a single cent ..
Or he has credit limit balance of 30 mil, and lends to me 30 mil, i am still short 70 mil.
Meanwhile, he can still be lending the remaining amt of 20 mil at 1.25 pct. Or he can move it up to 1.3 pct now that he knows there is someone looking for another 70 mil.
in such a case, the sibor will now be higher.
Assuming he stays at 1.25pct, the price remains at 1.25/1.00
Will i dare to fix the sibor at 1.25 ? when i only received 30 out of 100.
I can only guess that the next lender, say at 1.3pct have the limit for me to fund me the remaining 70.
and if that is not possible, then i can only guess / think again that the next level be 1.40
Then this trader will probably fix his SIBOR at 1.4
It is the THINKING/GUESSING part that makes setting the sibor so tough.
One cannot set a rate that one cannot fund himself.
Is this the best method for banks to set their sibor, NO. but it is the only way now.
Similarly, if i have excess funds and i want to lend. Mkt is 1.00/1.25 with 1.25 as my lending rate. I can then set the sibor as 1.25 even though i have not loan out anything yet.
I may decide to lend to the bidder at 1.00... upon hitting the price at 1.00, it will then be disclosed to me which bank it is.
Then i have to check our limit for him. If he is a good rated bank and i have sufficient limit, i can loan him all i have or all he needs base on the limit.
It may turn out to be a crappy bank and i have no credit limit for and hence lend him nothing.
Once the sibor rate is decided, it will be vetted by a manager, trader will have to explain WHY he is setting it at that rate.
Only then will it be submitted officially.
When all 12 contributors sent their rates, an average will be taken and published as the SIBOR for that day.
Assuming the SIBOR set for that day is 1.25 ...
I am really losing money...becos i have only received 30 (at 1.25) out of 100 that i need while the cost in funding the remaining 70 is higher..
assuming the 100 mil is made up of all the corporate loans for that day ... i have to honour these customers based on SIBOR of 1.25, while my actually average funding cost is higher than 1.25 ...
So how ?
will you (those who dispute on how rates are set) ask, why so unfair to the bank ?
We all know SOR is calculated based on the SGD exchange rate & Fed Rate...
If SIBOR doesnt increase side by side with SOR, wouldnt there be an arbitrage oppurtunity ? Say, borrow in SIBOR and lend based on SOR
Would that be the reason why Banks 'think' SIBOR should be more....
proud owner
18-03-15, 12:05
Borrowing sibor (SGD) will increase your liability base.
Based on this Liability base amount, banks have to Put aside a certain amount of cash with MAS (at zero interest) + Purchase a certain amount of Bonds.
Lower bond yield and the ZERO interest part will cost more .... so no arby opportunity lah ...
MAS is smart enough
This time round, SIBOR is higher really due to the weakening SGD against USD ...
in trading terminology ... OUTFLOW ...
Where the banks obtained their SGD funds to lend?
Mostly from depositors right, especially SGD Fixed Deposits?
If there is SGD outflow, then we should see banks eagerly upping their SGD FD rate to attract more SGD deposits isn't it?
The fact is, FD rate has not increased.
So, we can deduce that SGD Outflow is not material yet for banks to run out of SGD fund and hence banks unwilling to increase their FD rate.
But banks are so eager to jack up SIBOR rate!
I see big discrepancy here!
Also, as we know, SIBOR is NOT the real rate that banks lend each other (as you said).
So very big flaws here now!
Borrowing sibor (SGD) will increase your liability base.
Based on this Liability base amount, banks have to Put aside a certain amount of cash with MAS (at zero interest) + Purchase a certain amount of Bonds.
Lower bond yield and the ZERO interest part will cost more .... so no arby opportunity lah ...
MAS is smart enough
This time round, SIBOR is higher really due to the weakening SGD against USD ...
in trading terminology ... OUTFLOW ...
There are exchange rate risks and regulations on these right?
Otherwise might as well borrow SGD in SIBOR (at 0.90% now) and lend in Rupiah and get >10% interest/return?
We all know SOR is calculated based on the SGD exchange rate & Fed Rate...
If SIBOR doesnt increase side by side with SOR, wouldnt there be an arbitrage oppurtunity ? Say, borrow in SIBOR and lend based on SOR
Would that be the reason why Banks 'think' SIBOR should be more....
"THINKING part" needed to set SIBOR?
No wonder that is the BIGGEST PROBLEM with SIBOR!
The way you described, certain parts are not clear, for example:
1) Some Banks provide quotes to lend. Other banks provide quotes to borrow. Are you saying they do not lend/borrow at their quoted price? They lend/borrow at SIBOR rate fixed at 11am?
2) If that is the case, how is SIBOR actually fixed?
3) You say the traders like you may end up borrowing NOTHING or LENDING NOTHING despite SIBOR fixed at 11am?
Holly cow!That is the problem with SIBOR I am referring to!
Everyday, the BANKS "THINK" of some SIBOR rate going up, fixing SIBOR rate higher every day, but don't transact anything (they don't pay the higher inter-bank rate fixed by them) but the consumers DO!
Isn't this also the problem highlighted by amk which he then mentioned that ICE is moving to "actually transacted" rate and not "THINKING" rate in which SIBOR is currently determined in Singapore?
If MAS is not able to improve SIBOR transparency and fairness, I would suggest that they can copy from ICE.
Sorry i used trading terms ..
Bid = borrowing / buying
Offer = lending / selling
Due to banking secrecy act, be it a human broker quoting the prices or a trading platform, one will not know WHO is lending or borrowing, or its rating.
All one knows is the rate and the amount.
If i am borrowing, say 100 mil, i will be bidding say at 1.00 pct. If there is an offer (lender) say at 1.25 pct for 50 mil , thats all the info i have.
If i try to take ( borrow from him) 50 mil ( thats all he has, but not all i need), i MAY or MAY NOT get it at all.
If the lender's credit limit for me is fully utilized, i wont get a single cent ..
Or he has credit limit balance of 30 mil, and lends to me 30 mil, i am still short 70 mil.
Meanwhile, he can still be lending the remaining amt of 20 mil at 1.25 pct. Or he can move it up to 1.3 pct now that he knows there is someone looking for another 70 mil.
in such a case, the sibor will now be higher.
Assuming he stays at 1.25pct, the price remains at 1.25/1.00
Will i dare to fix the sibor at 1.25 ? when i only received 30 out of 100.
I can only guess that the next lender, say at 1.3pct have the limit for me to fund me the remaining 70.
and if that is not possible, then i can only guess / think again that the next level be 1.40
Then this trader will probably fix his SIBOR at 1.4
It is the THINKING/GUESSING part that makes setting the sibor so tough.
One cannot set a rate that one cannot fund himself.
Is this the best method for banks to set their sibor, NO. but it is the only way now.
Similarly, if i have excess funds and i want to lend. Mkt is 1.00/1.25 with 1.25 as my lending rate. I can then set the sibor as 1.25 even though i have not loan out anything yet.
I may decide to lend to the bidder at 1.00... upon hitting the price at 1.00, it will then be disclosed to me which bank it is.
Then i have to check our limit for him. If he is a good rated bank and i have sufficient limit, i can loan him all i have or all he needs base on the limit.
It may turn out to be a crappy bank and i have no credit limit for and hence lend him nothing.
Once the sibor rate is decided, it will be vetted by a manager, trader will have to explain WHY he is setting it at that rate.
Only then will it be submitted officially.
When all 12 contributors sent their rates, an average will be taken and published as the SIBOR for that day.
Assuming the SIBOR set for that day is 1.25 ...
I am really losing money...becos i have only received 30 (at 1.25) out of 100 that i need while the cost in funding the remaining 70 is higher..
assuming the 100 mil is made up of all the corporate loans for that day ... i have to honour these customers based on SIBOR of 1.25, while my actually average funding cost is higher than 1.25 ...
So how ?
will you (those who dispute on how rates are set) ask, why so unfair to the bank ?
proud owner
18-03-15, 12:43
Where the banks obtained their SGD funds to lend?
Mostly from depositors right, especially SGD Fixed Deposits? YES BUT APPLIES TO LOCAL BANKS OR QFA BANKS ONLY. THE OTHER 100S OF BANKS DO NOT HAVE DEPOSITS
If there is SGD outflow, then we should see banks eagerly upping their SGD FD rate to attract more SGD deposits isn't it?
The fact is, FD rate has not increased. OIL PRICE FELL FROM 100 TO 50 ... OUR PETROL PRICE DIDNT CHANGE
So, we can deduce that SGD Outflow is not material yet for banks to run out of SGD fund and hence banks unwilling to increase their FD rate.
But banks are so eager to jack up SIBOR rate!
OUTFLOW BE VIEWED AS = NO INFLOW + REDUCED INJECTION.
I see big discrepancy here!
Also, as we know, SIBOR is NOT the real rate that banks lend each other (as you said).
So very big flaws here now!
MAS HAS SOLD LOADS OF USD TO STRENGTHEN THE SGD. BY SELLING USD , MAS IS INJECTING SGD INTO THE SYSTEM.
THIS SGD WILL THEN TO PLACED IN OUR SYSTEM VIA DEPOSIT OR SWAP.
THIS INJECTION HAS HELPED MAINTAINED THE RATES.
BUT WHEN MAS STOPPED INJECTING FUNDS, AND AT MATURITY OF THE DEPOSIT OR SWAP, THE FUNDS GOT OUT OF THE SYSTEM. COUPLED WITH MORE BANKS NOW TURNING AROUND AND BUYING USD, MORE SGD LEAVES THE SYSTEM.
LOCAL BANKS CAN TAHAN FOR NOW BECOS THEY HAVE DEPOSITS.
THOSE WITHOUT DEPOSITS WILL USE OTHER CURRENCIES TO SWAP FOR SGD.
proud owner
18-03-15, 12:55
[QUOTE=teddybear;503329]"THINKING part" needed to set SIBOR?
No wonder that is the BIGGEST PROBLEM with SIBOR!
The way you described, certain parts are not clear, for example:
1) Some Banks provide quotes to lend. Other banks provide quotes to borrow. Are you saying they do not lend/borrow at their quoted price? They lend/borrow at SIBOR rate fixed at 11am?
SIBOR (O DENOTES OFFER) CONTRIBUTOR BANKS ONLY NEED TO PROVIDE LENDING RATE.
A SIMPLE DEFINITION OF SIBOR WILL BE :
'AT 11AM, THIS WILL BE THE RATE THAT MOST BANKS ARE ABLE TO RECEIVE THEIR FUNDS.'
HOWEVER AFTER LUNCH, SAY 2PM ... IT CAN BE A TOTALLY DIFFERENT RATE.
FOR CONSUMERS WITH LONG TERM LOANS, HOW DOES ONE DETERMINE WHAT RATE TO USE IF IT IS MOVING ALL THE TIME?
HENCE BBA SET UP THIS IBOR THINGY, SO THAT WHEN A LOAN IS DUE, A RATE THAT IS FIXED FOR THAT DAY WILL BE USED.
2) If that is the case, how is SIBOR actually fixed?
AS AMK DESCIBED
3) You say the traders like you may end up borrowing NOTHING or LENDING NOTHING despite SIBOR fixed at 11am?
Holly cow!That is the problem with SIBOR I am referring to!
IT IS NOT A PROBLEM JUST ABOUT SIBOR ... IT IS ALL ABOUT CREDIT RATING AND CREDIT LIMITS.
Everyday, the BANKS "THINK" of some SIBOR rate going up, fixing SIBOR rate higher every day, but don't transact anything (they don't pay the higher inter-bank rate fixed by them) but the consumers DO!
Isn't this also the problem highlighted by amk which he then mentioned that ICE is moving to "actually transacted" rate and not "THINKING" rate in which SIBOR is currently determined in Singapore?
[B][COLOR="#FF0000"][U][SIZE=3]If MAS is not able to improve SIBOR transparency and fairness, I would suggest that they can copy from ICE.
Both SIBOR and SOR is based on same currency, so theoretically shouldnt we consider Nil FX risk ?
This is different from borrowing SGD in SIBOR and lend in Rupiah.....
Hence banks might be perceiving that the fair value of SIBOR should be near to SOR inorder to prevent an arbitrage oppurtunity....
Where the banks obtained their SGD funds to lend?
Mostly from depositors right, especially SGD Fixed Deposits?
If there is SGD outflow, then we should see banks eagerly upping their SGD FD rate to attract more SGD deposits isn't it?
The fact is, FD rate has not increased.
So, we can deduce that SGD Outflow is not material yet for banks to run out of SGD fund and hence banks unwilling to increase their FD rate.
But banks are so eager to jack up SIBOR rate!
I see big discrepancy here!
Also, as we know, SIBOR is NOT the real rate that banks lend each other (as you said).
So very big flaws here now!
from the CNBC article on credit creation,
Lending occurs first, then banks raise funds to satisfy regulatory requirement.
I would say the interbank borrowing of SGD is much faster than trying to attract deposits. It is easier to raise $100million in the interbank market rather than attracting $100million in deposits.
Deposit do not leads to Lending, Lending leads to deposits. :2cents:
Overall still not much difference wah!
If you lend a lot, you run short of SGD, you need to attract more SGD deposits, you have to raise FD rate.
Or: if you think you can lend a lot at higher rate (by jacking up SIBOR), then you would need more SGD to lend, and hence you need to attract more SGD deposits, end up you still have to raise FD rate.
The fact that FD rate has not been raised means there are ample SGD liquidity around, banks don't need more deposits, so no reason why SIBOR has gone up by so much?
Furthermore, now we know that SIBOR can go up by a lot BUT no actual lending/borrowing takes PLACE! So, our current SGD SIBOR is not a REAL INTERBANK lending rate (despite the name)! That is to say, the banks could pay nothing to jack up SIBOR and earn more interests!
from the CNBC article on credit creation,
Lending occurs first, then banks raise funds to satisfy regulatory requirement.
I would say the interbank borrowing of SGD is much faster than trying to attract deposits. It is easier to raise $100million in the interbank market rather than attracting $100million in deposits.
Deposit do not leads to Lending, Lending leads to deposits. :2cents:
Anybody have any ideas on how long to raise funds via increasing FD rates vs interbank.
Perhaps FD is the cheapest form of financing, unfortunately it is slow and also inflexible.
Because it takes time for customers to switch FD, they have to wait till maturity, because if they break before maturity, there are penalties.
And what if for example, the bank increase the rates, there is not much increase in deposits, because locals still prefer to hold in local banks?
so banks have to pay higher interest on existing FD customers but does not increase the customer base.
And how does a bank chase away their customers if they no longer need the loan reserves?
As for interbank loans, there are overnight, 7 days, etc perhaps bankers here can elaborate furthers.
As such, there are a lot of flexibility in moving their funds around.
personally, I think banks prefer to pay more for the flexibility.
ps. this is my own thoughts, may not be actual case. I am not in banking line so I won't know.
Aiyah I think its really just down to two things. What the market anticipates and demand and supply. Anticipate is a no brainer. Everyone thinks the FED will raise rates soon.
I m guessing supply in the system is slowly being drained out, especially on the retail side. Banks are fighting hard for deposits nowadays as people bring out more money to invest in wealth products, properties overseas etc.
But what really matters at the end of the day is SIBOR hitting 1% soon. WOOHOO!!! let the pain come....
With the raising SIBOR and up so fast, looks like the OCR property price CRASH will come sooner than I expected! :hopelessness:
Aiyah I think its really just down to two things. What the market anticipates and demand and supply. Anticipate is a no brainer. Everyone thinks the FED will raise rates soon.
I m guessing supply in the system is slowly being drained out, especially on the retail side. Banks are fighting hard for deposits nowadays as people bring out more money to invest in wealth products, properties overseas etc.
But what really matters at the end of the day is SIBOR hitting 1% soon. WOOHOO!!! let the pain come....
http://www.straitstimes.com/news/business/markets/story/whats-so-important-about-whether-the-us-federal-reserve-drops-the-word-p
Just as the Fed contemplates a rise in US interest rates, plenty of central banks around the globe are doing just the opposite - cutting rates and using the same kind of "quantitative easing" as the US used in recent years. - See more at: http://www.straitstimes.com/news/business/markets/story/whats-so-important-about-whether-the-us-federal-reserve-drops-the-word-p#sthash.MV8ekYWp.dpuf
Clearly it is more transparent to set SIBOR based on actually traded rates, instead of what fixing banks "think"; for the simple reason that even when they don't collude, they may act in unison for obvious reasons. Clearly MAS should be the one who collate the SIBOR instead of ABS. Clearly MAS should look into it, perhaps they are already studying what ICE is going to do and they may copy from ICE, let's see.
proud owner
20-03-15, 00:21
if sibor has to be set on actually traded rate ... then every single loan has to be covered back to back ...
the processing cost will go up ... trust me ... eventually banks will find a way to pass that back to consumers and by then ... all will cry even louder ... cos the final rates to consumers will be even higher ...
they may increase the margin to cover cost etc ...
proud owner
20-03-15, 00:23
what will happen to our property market if all the banks raise rates ?
All the banks are "fixing" SIBOR higher, and will only go up since until today, despite the USD plunge and SGD appreciation because of Fed's pledge to be very slow in rate increase and unlikely to raise Fed rate in Jun, SIBOR didn't go down! So much so for excuses that SIBOR going up because SGD depreciating and Fed rate going up! :pig:
what will happen to our property market if all the banks raise rates ?
I though processing costs will go down?
Now they don't need a manager to check, chop and sign the "THINKING" rate to be submitted by any participating bank!
They don't even need to keep record for so many years! :biggrin-new:
Banks are already profiting a lot because SIBOR going up BUT their actual borrowing costs IBOR are lower (and FD rate didn't go up for lending banks), and no actual lending may actual have taken place even though SIBOR keep escalating almost everyday!
if sibor has to be set on actually traded rate ... then every single loan has to be covered back to back ...
the processing cost will go up ... trust me ... eventually banks will find a way to pass that back to consumers and by then ... all will cry even louder ... cos the final rates to consumers will be even higher ...
they may increase the margin to cover cost etc ...
I though processing costs will go down?
Now they don't need a manager to check, chop and sign the "THINKING" rate to be submitted by any participating bank!
They don't even need to keep record for so many years! :biggrin-new:
Banks are already profiting a lot because SIBOR going up BUT their actual borrowing costs IBOR are lower (and FD rate didn't go up for lending banks), and no actual lending may actual have taken place even though SIBOR keep escalating almost everyday!
Very chim...Does it mean that DBS FHR is better than SIBOR? So its recommended?
Not necessarily, depending on the spread of SIBOR and FHR for the respective housing loan..............
This is because in general, the housing loan package with FHR always has higher long-term spread than SIBOR!
That is to say, for example, Bank A provides loan at SIBOR + 0.9% throughout.
But DBS' FHR loan will be at FHR + 1.45% throughout.
Example, now DBS FHR = 0.4%.
3M SIBOR = 0.939%.
Difference is = 0.539%.
In this case, FHR+1.45% will be equivalent to (now) SIBOR+0.911%.
But as of now, you can get loan package at SIBOR+0.90% (hence cheaper than FHR+1.45%).
If SIBOR continues to increase while FHR remain fixed, and FHR spread remains at 1.45% (note that DBS has been increasing this spread from 1.25%) while SIBOR spread remains at 0.90%, then FHR will become more worth it.
The rest you can figure it out.
Very chim...Does it mean that DBS FHR is better than SIBOR? So its recommended?
3M SIBOR went from about 0.37% to now 0.97275% BUT Fixed Deposit rate never moved?! kelong ah! :samurai-killa:
3M SIBOR : 0.97275
:-(
3M SIBOR went from about 0.37% to now 0.97275% BUT Fixed Deposit rate never moved?! kelong ah! :samurai-killa:
Who called me?
More of mourning over loss of our founding father now...
Anyway, there are people who say still not 1% so no need to panic. Got chance to remortgage at fixed rate also prefer not to.
If don't want fixed rate then have to accept "think" rates lor.
3M SIBOR went from about 0.37% to now 0.97275% BUT Fixed Deposit rate never moved?! kelong ah! :samurai-killa:
/Those Dbs FHR package is meant for completed projects. Those buc ones they dun allow lei.
:(
If have BUC one, you may not even want to take up FHR because last I heard FHR long-term loan spread has increased to 1.60% !!!!!!!!!!!!!!!!
DBS is playing up the drum based on increasing SIBOR fear to cream you people!
Remember: FHR now = 0.40%, 3M-SIBOR = 0.97%, difference = 0.57%.
BUT: 3M-SIBOR loan (long-term, e.g. after year 3) = 3M-SIBOR + 0.90% = 1.87%.
FHR loan (long-term, e.g. after year 3) = FHR + 1.60% = 2.0% !!!!!!!!!!
FHR loan more EXPENSIVE than 3M-SIBOR !!!!
Now, isn't it in DBS interest to see 3M-SIBOR goes up so that it can increase the FHR loan spread further?
/Those Dbs FHR package is meant for completed projects. Those buc ones they dun allow lei.
:(
Not necessarily, depending on the spread of SIBOR and FHR for the respective housing loan..............
This is because in general, the housing loan package with FHR always has higher long-term spread than SIBOR!
That is to say, for example, Bank A provides loan at SIBOR + 0.9% throughout.
But DBS' FHR loan will be at FHR + 1.45% throughout.
Example, now DBS FHR = 0.4%.
3M SIBOR = 0.939%.
Difference is = 0.539%.
In this case, FHR+1.45% will be equivalent to (now) SIBOR+0.911%.
But as of now, you can get loan package at SIBOR+0.90% (hence cheaper than FHR+1.45%).
If SIBOR continues to increase while FHR remain fixed, and FHR spread remains at 1.45% (note that DBS has been increasing this spread from 1.25%) while SIBOR spread remains at 0.90%, then FHR will become more worth it.
The rest you can figure it out.
http://www.channelnewsasia.com/news/business/sibor-rises-above-1-in/1737558.html
Business SIBOR rises above 1% in sign that mortgages could rise further
The three-month Singapore interbank offered rate (SIBOR) at 1.00129 per cent on Tuesday (March 24) is the first time it rose above the 1 per cent mark in more than six years.
SINGAPORE: A key benchmark lending rate rose above the 1 per cent level for the first time in more than six years, indicating that mortgage rates will increase further in coming weeks.
The three-month Singapore interbank offered rate (SIBOR) was fixed at 1.00129 per cent on Tuesday (March 24), according to Association of Banks in Singapore (ABS) data posted on Bloomberg, up 0.9 per cent from Monday's fixing of 0.99216 per cent. The rate has been climbing steadily since end-December when it stood at around 0.45 per cent.
Many home loans in Singapore are pegged to SIBOR. For instance, Oversea-Chinese Banking Corp (OCBC) has a home loan package that charges an interest rate 0.85 percentage point above three-month SIBOR. If SIBOR rises, the interest rate will also increase. OCBC will review the rate every three months based on movements in SIBOR.
Singapore interest rates have been on the rise, in line with expectations that the US Federal Reserve will increase interest rates this year.
The weakening of the Singapore dollar against its US counterpart has also pushed rates higher since investors need more incentive to hold onto the local currency. The Singapore dollar is currently trading at around S$1.37 to the greenback, from around S$1.32 at the end of last year.
- CNA/kk
Really bullshit in sibor. Fed didn't move an inch.
FD rate never moved a bit, SIBOR gone up by so much! Kelong ah!
I already said SIBOR based on "THINKING" rate allows banks to exploit "THINKING" to make BIG MONEY! Banks so good in "thinking", I wonder whether MAS thinking how to protect consumers or not? :sorrow:
Really bullshit in sibor. Fed didn't move an inch.
proud owner
25-03-15, 00:12
Sibor will go higher ...
better embrace yourself ... and be prepared .......
USD will continue to strengthen against SGD, expect more and more outflow ... liquidity will tighten ....
People keep saying SG cannot set is own interests and therefore it can't go up. The banks are showing you it can be done quite easily, by thinking.
and Singapore inflation will hit the roof again? :distress:
Then after coming General Election, many people speculating will have GST increase or some other wealth taxes implemented, cost of living and inflation will go up significantly again because of all these taxes?
To the rich businessmen, no problem because they can pass the costs to consumers. To the top-income earners (the highest 1%, not the top 5% because the income gap between lowest in the top 1% income and lowest in the top 5% is HUGE!), they always can increase their own salary because they have management control to decide/persuade shareholders/owners..., but middle-income will be worst squeezed because on one hand they received NOTHING in budget "goodies" every year (compared to their lower income peers), and on the other hand all other form of tax increases they sure get hit?
Also, middle-income earners income rise tends to be the slowest! I still remember there was a Minister who said that the salary of Singaporeans in general cannot increase salary by too much without similar increase in competitiveness otherwise there will high inflation (something like that, can't remember exact wordings)! :crushed:
Sibor will go higher ...
better embrace yourself ... and be prepared .......
USD will continue to strengthen against SGD, expect more and more outflow ... liquidity will tighten ....
May be that is how they indirectly influence the interest rates, by allowing the banks to "THINK" about the rates? "THINKING" is the best way to get what I want! So I suppose they do the same????? :hopelessness:
People keep saying SG cannot set is own interests and therefore it can't go up. The banks are showing you it can be done quite easily, by thinking.
Many people are saying that USD is going up and SGD is coming down, so SIBOR need to increase because of outflow of money - Well, I can say this is plain bull-shit!
Why?
Very simple: Because when people buy USD by selling SGD, there is more SGD in circulation.
More SGD go where?
Into banks as deposits of course!
Banks got more deposits, but properties sales slowing, property loan (biggest businesses for the banks) slowing, less demand for SGD, how can banks FD rates increase? (which is just FD rate never increase!)
Banks are known to use FD for property loans, hence if FD never increase, too much SGD deposit, how can IBOR increase?
Therefore, it is clear that SIBOR increase not because of increase in real IBOR but because it is a "THINKING" rate!
Some people also tend to try to confuse people, saying that because SOR increase, thus SIBOR need to increase, which is plain non-sense again!
SOR is a result of borrowing in USD and lending in SGD, thus it perfectly makes sense that when USD increase against SGD, SOR need to increase to compensate for the loss when the lenders convert back SGD to USD! I would guess that for every 1% drop in SGD vs USD, you would expect about 0.1-0.2% increase in SOR!
However, SIBOR is lending in base currency of SGD, no exchange rate gain/loss consideration! So SIBOR should have nothing to do with SGD depreciating, and in fact, selling of SGD (hence SGD depreciation) should depress SIBOR even more! I would guess that for every 1% depreciation of SGD (resulting in more SGD in circulation) and assuming no increase in SGD demand, FD and hence SIBOR by right should drop by 0.1-0.2%!
Really bullshit in sibor. Fed didn't move an inch.
Looks like some banks are running out of sgd Hence the need to borrow at whatever it takes. there's a lack of liquidity. the problem started since last year with the FD promotions and savings account campaigns. I also think the effects of LCR cannot be under estimated.
Thank you for clearing my doubt on SOR vs SIBOR
However i have another question. Why SIBOR was coming down in 2006-2012 when SGD was going up consistantly against USD ?
As per the below logic, when SGD was in demand (which is evident from the price moving up) SIBOR should have moved up, but it didnt happen. Moreover it remained at historical low.
However, SIBOR is lending in base currency of SGD, no exchange rate gain/loss consideration! So SIBOR should have nothing to do with SGD depreciating, and in fact, selling of SGD (hence SGD depreciation) should depress SIBOR even more! I would guess that for every 1% depreciation of SGD (resulting in more SGD in circulation) and assuming no increase in SGD demand, FD and hence SIBOR by right should drop by 0.1-0.2%!
All those saving account campaigns like OCBC360? Bluff people want lah, higher interest only up to $50k, so low amount!
Which banks had hiked their FD rates and what rates now vs previously? As far as I know, DBS hasn't, their 12M FD is like 0.3% and 24M FD is like 0.5% for amount <$10k (or 50k?) (that is why FHR = 0.4% = average of 12M FD and 24M FD).
Looks like some banks are running out of sgd Hence the need to borrow at whatever it takes. there's a lack of liquidity. the problem started since last year with the FD promotions and savings account campaigns. I also think the effects of LCR cannot be under estimated.
All those saving account campaigns like OCBC360? Bluff people want lah, higher interest only up to $50k, so low amount!
Which banks had hiked their FD rates and what rates now vs previously? As far as I know, DBS hasn't, their 12M FD is like 0.3% and 24M FD is like 0.5% for amount <$10k (or 50k?) (that is why FHR = 0.4% = average of 12M FD and 24M FD).
Hi Bear
Agreed, OCBC360 is a waste of time with restrictions too. Think put into POSB 1.88% not so chek-sim....
POSB 1.88% is it FD? what terms & conditions / restrictions?
Hi Bear
Agreed, OCBC360 is a waste of time with restrictions too. Think put into POSB 1.88% not so chek-sim....
Just got an a/c with 1.88% with Standard Chartered Bk as well, its a combine ac but need to spend for $500 per mth with their credit card...
You asked a very good question! :applause:
People forgot about coincidental effects!
It was not SGD consistantly going up against USD that is causing SIBOR to drop, but rather, from e.g. 2009-2012, SGD in circulation was expanding at huge rate! There are lots of MONEY flooding into Singapore and into SGD! There are just SO MUCH SGD MONEY deposited into the BANKS that the banks are UNABLE TO LEND out fully because of the POOR SINGAPORE ECONOMY and hence FD rate and bank deposit rate SUNK to LOW LOW LOW! As a result, IBOR will SINK as well because BANKS have no need for much borrowing between themselves! SGD is not in demand, because of floods of SGD in circulation and low borrowing!
Now, because of that coincidental effect, people are trying to bluff you into believing that because SGD going up against USD causes SIBOR to drop and reverse now will be true? Call them bluff!!!! :monkey:
To me, the best way to know whether there is DEMAND FOR SGD is to look at the Banks' FD rate (especially the BIG 3 LOCAL BANKS with the highest local SGD deposits)! When these big 3 local banks' FD rate starts to move up, you sure know there is a lot of DEMAND FOR SGD! As of now, I do not see this happening at all! Thus, it doesn't make sense that SIBOR is moving up so fast with no corresponding movement from FD rate first!
Thank you for clearing my doubt on SOR vs SIBOR
However i have another question. Why SIBOR was coming down in 2006-2012 when SGD was going up consistantly against USD ?
As per the below logic, when SGD was in demand (which is evident from the price moving up) SIBOR should have moved up, but it didnt happen. Moreover it remained at historical low.
However, SIBOR is lending in base currency of SGD, no exchange rate gain/loss consideration! So SIBOR should have nothing to do with SGD depreciating, and in fact, selling of SGD (hence SGD depreciation) should depress SIBOR even more! I would guess that for every 1% depreciation of SGD (resulting in more SGD in circulation) and assuming no increase in SGD demand, FD and hence SIBOR by right should drop by 0.1-0.2%!
Thanks TeddyBear,
This makes sense now....
You asked a very good question! :applause:
People forgot about coincidental effects!
It was not SGD consistantly going up against USD that is causing SIBOR to drop, but rather, from e.g. 2009-2012, SGD in circulation was expanding at huge rate! There are lots of MONEY flooding into Singapore and into SGD! There are just SO MUCH SGD MONEY deposited into the BANKS that the banks are UNABLE TO LEND out fully because of the POOR SINGAPORE ECONOMY and hence FD rate and bank deposit rate SUNK to LOW LOW LOW! As a result, IBOR will SINK as well because BANKS have no need for much borrowing between themselves! SGD is not in demand, because of floods of SGD in circulation and low borrowing!
Now, because of that coincidental effect, people are trying to bluff you into believing that because SGD going up against USD causes SIBOR to drop and reverse now will be true? Call them bluff!!!! :monkey:
To me, the best way to know whether there is DEMAND FOR SGD is to look at the Banks' FD rate (especially the BIG 3 LOCAL BANKS with the highest local SGD deposits)! When these big 3 local banks' FD rate starts to move up, you sure know there is a lot of DEMAND FOR SGD! As of now, I do not see this happening at all! Thus, it doesn't make sense that SIBOR is moving up so fast with no corresponding movement from FD rate first!
Hi All. I am facing some stress now as the Sibor keeps climbing and I am having stress paying my housing loan for Mt Sinai Landed. My question to all is will Sibor keep going up? Is it advisable to switch to fixed rate now? All packages I have asked required 2 years lock in but thereafter it will be back to floating rate. Please advise. Thanks.
Hi All. I am facing some stress now as the Sibor keeps climbing and I am having stress paying my housing loan for Mt Sinai Landed. My question to all is will Sibor keep going up? Is it advisable to switch to fixed rate now? All packages I have asked required 2 years lock in but thereafter it will be back to floating rate. Please advise. Thanks.
thought u r going to buy northpark residences?
thought u r going to buy northpark residences?
Yes. Was originally planning for one. However the recent spike in sibor is a concern. So I would want to ensure I won't get into trouble with my landed as my current loan package is on floating sibor. I am looking for the fixed with minimum disruption and damage.
Yes. Was originally planning for one. However the recent spike in sibor is a concern. So I would want to ensure I won't get into trouble with my landed as my current loan package is on floating sibor. I am looking for the fixed with minimum disruption and damage.
do i smell a fire sale coming?
proud owner
25-03-15, 17:33
from 2007 to 2011 maybe 2012 ... there was a lot of inflow ... selling USD , buying of SGD...
Foreigners were buying loads of properties ...
That was INFLOW .... hence naturally SIBOR was LOW then ...
Banks in Singapore are not allowed to lend SGD to foreign parties UNLESS it is trade related.. purchasing SG properties is not considered as TRADE RELATED.
so foreign parties had to SELL USD for SGD..
these SGDs were then PAID to banks in SG... thats INFLOW...
for those who knows nothing about the SGD regulations set by MAS, it is very easy to mislead others with their layman 'logic'.
When foreign parties reverse their trades, Buying USD and selling SGD, that is an outflow ...
outflow = tighter liquidity = higher rates.
there are 2xx over banks in Spore, all are in FX but not all are in Rates.
when they need SGD, they BUY, they dont borrow.
when they dont want SGD, they sell , they dont lend.
i mentioned credit risk many times ..
one can BUY 100s of millions of USD, to rid of their SGD
But they do not have the credit facility to LEND that kind of amount of SGD.
LENDING has a much higher credit risk than BUYING AND SELLING
when a foreign investor comes into spore, where do they get their SGD ?
they have to BUY SGD , and SELL USD or EUR or CNY or whatever ... an exchange ..
when alot of foreigners come in ..and do this at the same time or over a long period of time, all doing the same thing ... BUYING SGD... SGD will strengthen ..
THIS IS INFLOW ... so rates fall ...
when these foreigners leave altogether ..or massively... can they bring their SGD out of the country ?
NO ..
and they dont want also ..
SO .. they SELL away their SGD, and BUY another currency like USD, ...
and when they all do it collectively ... Selling SGD ,,, SGD will weaken (like right now) ... and thats OUTFLOW ...
and OUTFLOW will result in higher rates ...
One will argue that the same amount of SGD is circulating ... Is that so ?
on a daily basis, MAS will be in the market either absorbing the SGD or draining it, whenever the FX rates get too wild ..
During an INFLOW, part of the liquidity is absorbed by banks, the rest by MAS.
During an outflow, the same occurs.
Central banks can only attempt to SLOW down the moves, they cannot go against the trend.
At some point, central banks will stop.
that will be when one see the effect of FX reflected on Rates ..
USD vs SGD has dropped from 1.39 to 1.368 over past few days, but strangely, SIBOR continue to increase to hit >1.0%!!!!!!!!!
If it is true that when USD vs SGD increases, SIBOR should increase,
then the strange of phenomenon is that the reverse somehow didn't happens, i.e. NOW when USD vs SGD drops, SIBOR continue to increase! :banghead:
This is no different from previously when oil increases from US$50 to US$110, public transport fares got jacked up because of much higher operating costs (that is the given reason), but when oil drop from US$110 back to US$50, transport fares still continue to increase (and what reason/excuse they give???) :tsk-tsk:
from 2007 to 2011 maybe 2012 ... there was a lot of inflow ... selling USD , buying of SGD...
Foreigners were buying loads of properties ...
That was INFLOW .... hence naturally SIBOR was LOW then ...
Banks in Singapore are not allowed to lend SGD to foreign parties UNLESS it is trade related.. purchasing SG properties is not considered as TRADE RELATED.
so foreign parties had to SELL USD for SGD..
these SGDs were then PAID to banks in SG... thats INFLOW...
for those who knows nothing about the SGD regulations set by MAS, it is very easy to mislead others with their layman 'logic'.
When foreign parties reverse their trades, Buying USD and selling SGD, that is an outflow ...
outflow = tighter liquidity = higher rates.
there are 2xx over banks in Spore, all are in FX but not all are in Rates.
when they need SGD, they BUY, they dont borrow.
when they dont want SGD, they sell , they dont lend.
i mentioned credit risk many times ..
one can BUY 100s of millions of USD, to rid of their SGD
But they do not have the credit facility to LEND that kind of amount of SGD.
LENDING has a much higher credit risk than BUYING AND SELLING
when a foreign investor comes into spore, where do they get their SGD ?
they have to BUY SGD , and SELL USD or EUR or CNY or whatever ... an exchange ..
when alot of foreigners come in ..and do this at the same time or over a long period of time, all doing the same thing ... BUYING SGD... SGD will strengthen ..
THIS IS INFLOW ... so rates fall ...
when these foreigners leave altogether ..or massively... can they bring their SGD out of the country ?
NO ..
and they dont want also ..
SO .. they SELL away their SGD, and BUY another currency like USD, ...
and when they all do it collectively ... Selling SGD ,,, SGD will weaken (like right now) ... and thats OUTFLOW ...
and OUTFLOW will result in higher rates ...
One will argue that the same amount of SGD is circulating ... Is that so ?
on a daily basis, MAS will be in the market either absorbing the SGD or draining it, whenever the FX rates get too wild ..
During an INFLOW, part of the liquidity is absorbed by banks, the rest by MAS.
During an outflow, the same occurs.
Central banks can only attempt to SLOW down the moves, they cannot go against the trend.
At some point, central banks will stop.
that will be when one see the effect of FX reflected on Rates ..
Hi Proud owner,
Thanks for the write up.... Is there any publicly available economic indicators which act as a proxy to help us track the inflow & outflow ?
eg : MAS Forex Reserve (assuming inflow will increase FOREX reserve) ? Total Debt (Assuming the inflow will be deposited in bank and those deposits are debt from banks perspective) ? or Loan Deposit ratio of Singapore banks ?
When there are very less number of property transactions happening, how can we make sure that we are really facing an outflow from property sale (property sale itself is not happening) ?
However our Forex reserve has indeed dropped during last 6 months and as per news reports its due to MAS selling of USD to support SGD and keep it within band.
on a daily basis, MAS will be in the market either absorbing the SGD or draining it, whenever the FX rates get too wild ..
During an INFLOW, part of the liquidity is absorbed by banks, the rest by MAS.
During an outflow, the same occurs.
Central banks can only attempt to SLOW down the moves, they cannot go against the trend.
At some point, central banks will stop.
that will be when one see the effect of FX reflected on Rates ..
Sorry, only now read your post in first page....
"When SGD weakens, against USD, we always say there is OUTFLOW"
Hi Proud owner,
Thanks for the write up.... Is there any publicly available economic indicators which act as a proxy to help us track the inflow & outflow ?
eg : MAS Forex Reserve (assuming inflow will increase FOREX reserve) ? Total Debt (Assuming the inflow will be deposited in bank and those deposits are debt from banks perspective) ? or Loan Deposit ratio of Singapore banks ?
When there are very less number of property transactions happening, how can we make sure that we are really facing an outflow from property sale (property sale itself is not happening) ?
However our Forex reserve has indeed dropped during last 6 months and as per news reports its due to MAS selling of USD to support SGD and keep it within band.
proud owner
26-03-15, 12:25
USD vs SGD has dropped from 1.39 to 1.368 over past few days, but strangely, SIBOR continue to increase to hit >1.0%!!!!!!!!!
If it is true that when USD vs SGD increases, SIBOR should increase,
then the strange of phenomenon is that the reverse somehow didn't happens, i.e. NOW when USD vs SGD drops, SIBOR continue to increase! :banghead:
This is no different from previously when oil increases from US$50 to US$110, public transport fares got jacked up because of much higher operating costs (that is the given reason), but when oil drop from US$110 back to US$50, transport fares still continue to increase (and what reason/excuse they give???) :tsk-tsk:
i am replying for the benefit of all who wonder what is going on
and not particularly to you ..
my patience will run out soon ..
there are many reasons behind each move..
usdsgd moved from 1.25 to 1.39 .... do you know how many points that is ? what is 1.39 to 1.3680 compared to the earlier move up ?
this tiny drop is just a breather .. a tiny retracement ... buyers decide to take a pee ... and wait for better level to buy ... 1000s of reasons but the big trend hasnt changed ..
perhaps the traders all went to queue up to pay respect to LKY .. hence the mkt quieten a little ...
1.39 to 1.368 is nothing ... compared to the amount of USD purchased from 1.25 to 1.39 ...
If all the usd buying or selling are local banks ... then the amount of SGD in our system doesnt change
But when foreigners are buyers of USD ... SGD leaves the system .. (outflow) ( reverse is true for USD selling, then INFLOW)
when usd sgd moved from 1.25 to 1.39... it wasnt just the local banks ...
anyway Local bank cannot and will not dare move the fx rate like that without being 'buttered' by MAS..
but when foreigners are behind the move ... there is not much MAS can do..
SIBOR overtaken SOR
3M SIBOR : 1.02516
3M SOR : 0.99934
thanks to MAS, SIBOR1M had fallen back to 0.76. (SOR1M goes even further to 0.616).
I am curious to know what it will be next week.
This is a good thread.
:cheers5:
bargain hunter
17-04-15, 14:18
as bro proud owner explained earlier, could this now be a slight reversal of what was happening? instead of just mas intervention, there is some inflow demand by foreigners for sgd and that is causing the sgd to strengthen more than just MAS effect and resulting in sibor dropping a bit?
sorry, i'm really not a forex flow/interest rate person. :ashamed1:
thanks to MAS, SIBOR1M had fallen back to 0.76. (SOR1M goes even further to 0.616).
no it's definitely MAS effect. the SGD demand is generated by MAS, when SGD is not expected to drop, the trade reversed. Previously Jan's unexpected MAS move made all the banks excited, one after another giving lower and lower year-end SGD expectations, and all trades bet on it (selling, and all sorts of vol products). Now the bet is wrong, the trade on the reverse happened.
no it's definitely MAS effect. the SGD demand is generated by MAS, when SGD is not expected to drop, the trade reversed. Previously Jan's unexpected MAS move made all the banks excited, one after another giving lower and lower year-end SGD expectations, and all trades bet on it (selling, and all sorts of vol products). Now the bet is wrong, the trade on the reverse happened.
Chim..In lay man terms..Does it mean that as long as sgd strengthen... Interest rate will drop in order to make it less expensive to borrow?
So complex...
bargain hunter
17-04-15, 15:53
hmm, so this is "just" mas. if foreign funds return, sgd would be even stronger and interest rate would go down? :)
no it's definitely MAS effect. the SGD demand is generated by MAS, when SGD is not expected to drop, the trade reversed. Previously Jan's unexpected MAS move made all the banks excited, one after another giving lower and lower year-end SGD expectations, and all trades bet on it (selling, and all sorts of vol products). Now the bet is wrong, the trade on the reverse happened.
foreign funds will not return. all going to USD now. this trend is global. simply because US yield curve is steepening (expected forward yields going up). What MAS did is to decelerate or accelerate SGD's move. What happen in last 2 months is that market *over*estimated the drop, hence the rate rise is overdone. rate eventually will still rise but now it corrects the overshoot first.
http://www.usdebtclock.org/
What is money ? It is just a piece of IOU.
foreign funds will not return. all going to USD now. this trend is global. simply because US yield curve is steepening (expected forward yields going up). What MAS did is to decelerate or accelerate SGD's move. What happen in last 2 months is that market *over*estimated the drop, hence the rate rise is overdone. rate eventually will still rise but now it corrects the overshoot first.
Oh no... why foreign funds will not return? In the short term perhaps but surely in the long run? Our government will think of ways to support the SMEs in the near term and continue to attract tourists and investments in the sectors they deem to be beneficial to Singapore.
http://www.brookings.edu/blogs/ben-bernanke/posts/2015/03/30-why-interest-rates-so-low
Hear from the horse mouth.
This sounds very textbook-y, but failure to understand this point has led to some confused critiques of Fed policy. When I was chairman, more than one legislator accused me and my colleagues on the Fed’s policy-setting Federal Open Market Committee of “throwing seniors under the bus” (to use the words of one senator) by keeping interest rates low. The legislators were concerned about retirees living off their savings and able to obtain only very low rates of return on those savings.
I was concerned about those seniors as well. But if the goal was for retirees to enjoy sustainably higher real returns, then the Fed’s raising interest rates prematurely would have been exactly the wrong thing to do. In the weak (but recovering) economy of the past few years, all indications are that the equilibrium real interest rate has been exceptionally low, probably negative. A premature increase in interest rates engineered by the Fed would therefore have likely led after a short time to an economic slowdown and, consequently, lower returns on capital investments. The slowing economy in turn would have forced the Fed to capitulate and reduce market interest rates again. This is hardly a hypothetical scenario: In recent years, several major central banks have prematurely raised interest rates, only to be forced by a worsening economy to backpedal and retract the increases. Ultimately, the best way to improve the returns attainable by savers was to do what the Fed actually did: keep rates low (closer to the low equilibrium rate), so that the economy could recover and more quickly reach the point of producing healthier investment returns.
3M SOR plunged to 0.77314%
3M SOR plunged to 0.77314%
Not sustainable, see it as a correction. Quickly get out before it's too late.
Not sustainable, see it as a correction. Quickly get out before it's too late.
'Not sustainable'? Why is it not sustainable? In the short term or long term?
What may the SIBOR be in 1Q2016? Repricing needs to incur fees and sometimes need to give notice to the financing company of one to three months.
Depending on outstanding loan amount, only if the outstanding loan amount is huge is it worth the effort to switch. If your other investments are not giving good returns, perhaps liquidating them and paying off the outstanding to reduce loan repayment amount is an option?
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