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