SINGAPORE – Singapore’s money-market rates have dropped as traders shrug off the central bank’s first monetary policy shift in five years.
The Singapore Overnight Rate Average, the de facto standard for Singapore’s loan products including home loans, fell to 2.08 per cent on March 13, the lowest since Dec 30, 2022. That is because slower lending, foreign inflows into fixed deposits and a resilient currency helped keep cash conditions ample. That daily rate rose to 2.24 per cent on March 14.
The Monetary Authority of Singapore (MAS), which uses the exchange rate as its main policy tool, eased its Singapore dollar policy for the first time since 2020 in January. That was expected to put downward pressure on the Singapore dollar and upward pressure on interest rates, as traders demand higher returns for investing in a weaker currency. Those bets haven’t materialised.
Moreover, the Singapore dollar’s outperformance versus most Asian currencies in 2025 has also pushed down borrowing costs. Like many Asian peers, Singapore’s currency may also have been influenced by the path of China’s renminbi, which has been relatively stable and acts as a anchor of sorts in the region.
“Singapore dollar liquidity has been flush as investors could still be holding the view over the currency’s appreciation despite the earlier slope reduction from the MAS in January, while the loan-to-deposit ratio has stayed low,” said OCBC head of forex and rates strategy Frances Cheung.
The drop in borrowing costs comes at a crucial time for Singapore’s economy, with the MAS signalling downside risks to growth at the January policy decision. Singapore’s loan-to-deposit ratio has fallen from 70.5 per cent at end 2023 to 68.2 per cent as of January.
However, the authorities would be reluctant to see a sharp drop in interest rates over the medium term as it may hinder their goal of cooling the property market, Ms Audrey Ong, a strategist at Barclays, wrote in a note on March 11.
For now, better liquidity has translated into robust demand at bond auctions. The sale of the 2035 Singapore sovereign bond on Feb 26 had a bid-to-cover ratio of 2.03 times, the highest for the 10-year tenor since July 2022. BLOOMBERG
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