Wednesday, October 1, 2008

MAS moves to ensure market liquidity

THE Monetary Authority of Singapore (MAS) is thought to have injected a total of $3.8 billion into Singapore’s money markets since the start of this week, according to two traders familiar with the matter. This has helped ease pressure on short-term interest rates in the face of a mounting global credit shortage.

“The MAS came in with $1.3 billion when the overnight rate was over 1.8 per cent,” one of the traders told Dow Jones Newswires.

Yesterday’s injection at about 10.30am led the overnight rate to fall to around1.375 per cent. It is believed the MAS injected another $2.5 billion into the market on Monday, when $3 billion in maturing treasury bills added further liquidity to the market.

MAS does not comment on specific money market operations. However, a spokesperson confirmed it was closely monitoring developments in global financial markets and the impact on Singapore’s markets and financial institutions. “Financial institutions in Singapore are functioning normally. They have also enhanced their risk management measures given the uncertain market conditions,” the spokesperson said in a statement.

While US dollar money markets have been strained over the past fortnight, the MAS said the Singapore dollar domestic markets have been relatively calm. But added that “as Singapore dollar funding activities picked up into the quarter-end, Singapore dollar Sibor (Singapore interbank offered rates) came under some upward pressure. MAS has responded by keeping a higher level of liquidity in the banking system through its market operations. Singapore dollar interest rates have since eased to below 2 per cent”.

The MAS said it will consider on a case-by-case basis any unique liquidity needs of individual banks and is prepared to inject additional liquidity as required. In anticipation of tighter lending conditions, in July, the MAS expanded its Standing Facility for users of the MAS Electronic Payment System, which is a national interbank payment system. This provided assurance that banks can readily access central bank liquidity when required.