In light of the shift in investment portfolios to Asia, as well as to develop Singapore as a leading Asian asset management centre, the Monetary Authority of Singapore has revealed plans to enhance corporate debt market.
Date: Mar 16, 2012
In light of the shift in investment portfolios to Asia, as well as to develop Singapore as a leading Asian asset management centre, the Monetary Authority of Singapore (MAS) has revealed plans to enhance corporate debt market.
First, MAS will provide swap liquidity to primary dealer banks handling Singapore dollar debt issuance for foreign corporates. These offshore entities usually have no need for the Singapore dollar funds raised and mostly swap them into a foreign currency, usually US dollars.
Secondly, MAS will partner with the industry to create a Singapore dollar corporate debt securities lending platform, from which key players will be able to borrow securities for market making. By providing greater assurance that banks will be able to deliver any given security, this platform will reduce the risk of market makers being squeezed in the event they are unable to short-cover the bonds they have sold. Improved market liquidity will mean that asset managers can be more certain of their ability to enter and exit their positions with minimal price slippage.
And thirdly, MAS has initiated a price discovery platform where market participants will contribute end-of-day prices for a universe of Singapore dollar corporate bonds. This is targeted for completion by the second half of this year. This initiative will significantly improve transparency in the corporate bond market and provide reliable mark-to-market prices for the industry and asset managers alike.