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Thread: SOR turns negative in the Switzerland of Asia

  1. #1
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    Default SOR turns negative in the Switzerland of Asia

    THE SWITZERLAND OF ASIA
    The rush for safety has spilled into Singapore and led to the city-state following the United States and Switzerland where short-term interest rates have turned negative, implying that depositors are willing to pay to keep funds at banks or in short-term bills.


    Singapore's swap offer rate (SOR) -- a rate determined by both local deposit rates and FX forwards -- was set in negative territory for the second day on Thursday as funds seeking safety flooded the local market with cash. The six-month SOR was fixed in negative territory for the first time ever on Wednesday.


    On Thursday, three and six month rates were fixed at minus 0.69870 and minus 0.99258 percent respectively.


    "In the current climate of the U.S. keeping rates low for an extended period of time, and given the MAS's FX appreciation bias, we believe the likely outcome will be sustained low fixes and, in the near term, negative fixes," said analysts at Nomura in a note to clients.


    The Singapore central bank's resolve to allow more currency appreciation and deter capital inflows -- on top of funds rushing into what's seen as the safest bond market in Asia -- have all led to the rare occurrence of negative interest rates.


    Read full article




    This is just great! I took up a SOR-linked bank loan last month

  2. #2
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    So boathouse residence's uob promo SOR+0% till top, we get cash back every month?


  3. #3
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    Don't know Is there a clause in the agreement stating that the interest will be at least $0? If not, the banks are paying you to borrow money from them

  4. #4
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    sibor dropping?
    Affordable means small

  5. #5
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    Dropping too but at a slower rate.

  6. #6
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    Mine is 0.75% above 3-mth SOR

    Technically, does that mean 0.75 + ( minus 0.69870) = 0.0513%

    Can the bank dont follow?

  7. #7
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    Default Taken from today's Straits Times

    Borrowers cheered yesterday as the swap offer rate (SOR), a benchmark interest rate that mortgage rates are commonly pegged to, fell below zero for the first time.

    In a historic moment for Singapore’s banking industry, the three-month SOR plunged to -0.0119%.

    The SOR, which is fixed by the Association of Banks in Singapore daily, represents the average cost of funds that banks in Singapore use for commercial lending. It also factors in exchange rate movements.

    Traditionally, the SOR is more volatile than the Singapore inter-bank offered rate (Sibor), which is the other benchmark interest rate in Singapore.

    A negative rate is startling because in economic theory, it implies that banks are so flush with cash that they now charge a “fee”- as opposed to paying interest – for accepting deposits.

    Bankers said yesterday that this is happening because investors are switching out of the US dollar, and there are increased cash flows into Singapore.

    The Singdollar to US dollar exchange rate also affects the SOR. With a weakening greenback, the SOR will continue to fall.

    Banks here typically peg their loan packages to the Sibor or SOR, plus a profit margin.

    But don’t expect banks to end up paying their customers to borrow from them.
    OCBC Bank and UOB, which have loans packages pegged to the SOR, have said that there are clauses to “floor” the rates at zero, even if the SOR is negative.


    Still, Mr Vinod Nair, chief executive of website Smartloans.sg, which offers home loan comparisons, said: “I think now is a great time to refinance home loans, and I don’t expect the SOR to rebound in the next few years, so there should not be an issue with volatility.”

    Home owners taking up new Sibor-pegged property loans pay between 1% and 1.33%, while loans pegged to the SOR may end up paying between zero and 0.6% with the new SOR rates, he noted.

    Indeed, some economists believe that SOR rates are likely to remain low for a while yet.

    UOB economist Chow Penn Nee said some factors that will keep interest rates low include the United States Federal Reserve’s announcement that interest rates will be kept low until mid-2013.

    Also, with the Monetary Authority of Singapore’s current monetary policy stance of a Singdollar appreciation, the US dollar is likely to fall against the Singdollar.

    This will mean even more funds flowing into Singapore, which still has a triple-A rating and is considered an alternative to the US dollar.

    Mr Saktiandi Supaat, Maybank’s head of forex research, said: “we may see a rebound if there is some intervention by the MAS or if the forward rate changes due to market developments. But given the already low SOR rates we are seeing over the past year or so at around 0.2%, the rebound may not be so soon.”

    Barclays Capital economist Leong Wai Ho, on the other hand, does not think that the depressed SOR will persist.

    He said: “This is not considered equilibrium, and can’t last too long. It counters the macro-prudentials that have been put in place to lighten property speculation.”

    “I think this may be an MAS move to discourage fund flows into Singapore. It may last for two weeks, until we get over the phase of our lives that we are worried about the US downgrade.”

    Source: the Straits Times
    Yee ha! Did I tickle your funny bone?


  8. #8
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    UOB has withdrawn all SOR-based packages and replaced them with SIBOR-based packages. For those with existing SOR-based packages, they will peg the SOR at 0% if it dips into the negative level. For eg if your pkg is SOR+1% and SOR is negative, u still have to pay 1% interest. Chinese bank not so dumb lah......sure got clause to protect their interests.....

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    Quote Originally Posted by KarenK
    UOB has withdrawn all SOR-based packages and replaced them with SIBOR-based packages. For those with existing SOR-based packages, they will peg the SOR at 0% if it dips into the negative level. For eg if your pkg is SOR+1% and SOR is negative, u still have to pay 1% interest. Chinese bank not so dumb lah......sure got clause to protect their interests.....
    Which bank is still offering SOR?

  10. #10
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    Quote Originally Posted by mygeemeel
    Which bank is still offering SOR?
    Support me la.. I am a mortgage broker

  11. #11
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    Quote Originally Posted by newbie11
    Support me la.. I am a mortgage broker
    Are you sure boh? Sekali you OKT ah.

  12. #12
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    Quote Originally Posted by mygeemeel
    Which bank is still offering SOR?
    I just took up the 3m SOR from bank of china and UOB recently. Very good interest rate. May consider to buy another unit for investment if the price from developer is good. Cheer for low low interest rate........

  13. #13
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    You can try ANZ.
    Quote Originally Posted by mygeemeel
    Which bank is still offering SOR?

  14. #14
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    Quote Originally Posted by propertyinvestor
    I just took up the 3m SOR from bank of china and UOB recently. Very good interest rate. May consider to buy another unit for investment if the price from developer is good. Cheer for low low interest rate........
    UOB already withdrawn all SOR-based pkgs liao

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    Tks. Care to share what pkg did you sign with these banks?

  16. #16
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    Quote Originally Posted by KarenK
    UOB already withdrawn all SOR-based pkgs liao
    Ya loh. Spoke to UOB a few mins ago. She say she already warned me it will expire end July.

  17. #17
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    Got some info:

    China Bank: if SOR negative, they take as zero &
    ANZ: taking 0.1% as min. for SOR even if negative..

  18. #18
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    my CIMB 3mth SOR package has no clause on negative SOR rate, or minimum rate. So am I getting paid for borrowing soon?

  19. #19
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    Quote Originally Posted by newbie11
    Support me la.. I am a mortgage broker
    Support u lah, buy me kopi...tell me more

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    Quote Originally Posted by Jadey
    my CIMB 3mth SOR package has no clause on negative SOR rate, or minimum rate. So am I getting paid for borrowing soon?
    i think so..gd for u

  21. #21
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    Quote Originally Posted by Jadey
    my CIMB 3mth SOR package has no clause on negative SOR rate, or minimum rate. So am I getting paid for borrowing soon?
    Test case... Sue for it

    Beware catch all clause though.....

  22. #22
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    Quote Originally Posted by kingkong1984
    Test case... Sue for it

    Beware catch all clause though.....
    Banks sure eat you. They cannot be trusted. Even if you are right, you can try hiring lawyers and spend your time to fight the case. It is not worth it unless you are sure negative SOR drags on (they would have come out with a internal circular to floor the rates at 0% or +x%) or your have borrowed millions.

  23. #23
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    Is it written as a clause in the mortgage agreement?
    Quote Originally Posted by land118
    Got some info:

    China Bank: if SOR negative, they take as zero &
    ANZ: taking 0.1% as min. for SOR even if negative..

  24. #24
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    Do you know????

    SOR rates
    1 mth 0.72349
    2 mths 0.61221
    3 mths 0.69870
    6 mths 0.99258
    9 mths 0.16382
    12 mths 0.19770

    And finally sibor moved.

    1 mth 0.26944
    2 mths 0.33056
    3 mths 0.39528
    6 mths 0.50208
    9 mths 0.60833
    12 mths 0.66944

  25. #25
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    Quote Originally Posted by newbie11
    Do you know????

    SOR rates
    1 mth 0.72349
    2 mths 0.61221
    3 mths 0.69870
    6 mths 0.99258
    9 mths 0.16382
    12 mths 0.19770

    And finally sibor moved.

    1 mth 0.26944
    2 mths 0.33056
    3 mths 0.39528
    6 mths 0.50208
    9 mths 0.60833
    12 mths 0.66944
    tks for sharing

  26. #26
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    I thought SOR was negative yesterday. Suddenly has gone so much positive?
    Quote Originally Posted by newbie11
    Do you know????

    SOR rates
    1 mth 0.72349
    2 mths 0.61221
    3 mths 0.69870
    6 mths 0.99258
    9 mths 0.16382
    12 mths 0.19770

    And finally sibor moved.

    1 mth 0.26944
    2 mths 0.33056
    3 mths 0.39528
    6 mths 0.50208
    9 mths 0.60833
    12 mths 0.66944

  27. #27
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    Quote Originally Posted by DC33_2008
    I thought SOR was negative yesterday. Suddenly has gone so much positive?
    All the SOR rates up to 6 month are negative. He never looked at the sign of the quote, e.g. SOR 6M is -0.99

  28. #28
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    Quote Originally Posted by newbie11
    Do you know????

    SOR rates
    1 mth 0.72349
    2 mths 0.61221
    3 mths 0.69870
    6 mths 0.99258
    9 mths 0.16382
    12 mths 0.19770

    And finally sibor moved.

    1 mth 0.26944
    2 mths 0.33056
    3 mths 0.39528
    6 mths 0.50208
    9 mths 0.60833
    12 mths 0.66944
    What's your source?
    The figure for 3-month SOR at Bloomberg is still a negative.

  29. #29
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    darn. my staff gave me wrong rates. i just checked teletext. this is

    3m sor is -0.362
    3m sibor 0.36251

    btw BOC for new applications will apply floor rate of 0.2% if SOR is <0. Hence it is spread + 0.2%

  30. #30
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    Do you mean it applies to both new application and existing agreement for ANZ?
    Quote Originally Posted by land118
    Got some info:

    China Bank: if SOR negative, they take as zero &
    ANZ: taking 0.1% as min. for SOR even if negative..

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