Singapore is blazing a trail in the global effort to replace Libor, becoming one of the first countries to auction debt linked to an alternative benchmark.
The Monetary Authority of Singapore sold S$500 million ($366 million) of six-month notes with a spread over the compounded Singapore Overnight Rate Average on Tuesday. The country is adopting SORA as it moves away from the SGD Swap offer rate, which uses the London interbank offered rate in computation.
The move is part of a broader push as policymakers around the world develop new benchmarks to replace Libor by the end of 2021, after trading informing the rate dried up and European and U.S. banks were found to have manipulated it for their own gain.
“It’s a ground-breaking initiative,” said Claude Brown, a partner at Reed Smith LLP in London. “It looks like MAS has already beaten the U.S. Treasury to it.”
Hundreds of trillions of dollars of global assets are still tied to Libor, from student loans and mortgages to interest-rate swaps and collateralized loan obligations.
Analysts say banks, businesses and other national authorities could follow Singapore’s example after the transition lost steam during the coronavirus pandemic.
“It’s a big deal,” said John Coleman, senior managing director of the fixed-income group at R.J. O’Brien & Associates in Chicago. “The buy-side community has to adjust. When they see a government going this way, it’s no longer a gimmick or something that may go away.”
In the U.S., the Treasury is “very seriously studying the issue,” said Jon Hill, U.S. rates strategist at BMO Capital Markets. “I expect them to formally announce SOFR-linked debt later this year,” he said, referring to the Secured Overnight Financing Rate, the Federal Reserve’s preferred replacement for dollar Libor.
Asia has lagged the rest of the world in preparing for the change, but Singapore could offer a regional template for the shift.
A few debt securities have already been issued off SORA, including ones from developer CapitaLand Ltd. and the country’s biggest lender DBS Group Holdings Ltd.
Eleven banks including Deutsche Bank AG, Standard Chartered Bank, Citibank NA and DBS Group are ready to trade SORA derivatives, according to a June statement.
Progress on establishing alternative reference rates across the rest of Asia has been patchy. In Hong Kong, the Treasury Markets Association has identified the Hong Kong Dollar Overnight Index Average, or Honia, as an alternative rate to the Hong Kong interbank offered rate. The first Honia-linked interest rate swap was centrally cleared in July.
Honia still lacks traction in Hong Kong, partly because banks can continue to reference Hibor for existing and future loan products beyond 2021, according to Francis Chan, senior analyst at Bloomberg Intelligence.
Singapore’s move “may convince other governments and jurisdictions to look at their own practices,” said Jonathan Horan, partner at Linklaters LLP in Singapore. “Everyone needs to focus on this as the date for Libor discontinuance looms.”
Overall, the bias in prices is: Downwards.
By the way, prices are vulnerable to a correction towards 2,624.50.
The projected upper bound is: 2,641.60.
The projected lower bound is: 2,472.86.
The projected closing price is: 2,557.23.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 20 white candles and 30 black candles for a net of 10 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 46.8510. This is not an overbought or oversold reading. The last signal was a sell 2 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 46.25. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 10 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 29. This is not a topping or bottoming area. The last signal was a buy 9 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 5 period(s) ago.
Rex Takasugi – TD Profile
STRAITS TIMES closed down -2.050 at 2,561.040. Volume was 31% below average (neutral) and Bollinger Bands were 40% narrower than normal.
Open High Low Close Volume 2,556.960 2,567.210 2,555.440 2,561.040 223,199,280
Technical Outlook Short Term: Neutral Intermediate Term: Bearish Long Term: Bearish
Moving Averages: 10-period 50-period 200-period Close: 2,561.76 2,618.22 2,846.59 Volatility: 12 20 30 Volume: 335,057,696 291,731,136 313,495,488
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
STRAITS TIMES is currently 10.0% below its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods.
Our volume indicators reflect moderate flows of volume out of .STI (mildly bearish). Our trend forecasting oscillators are currently bearish on .STI and have had this outlook for the last 25 periods.