Latest news with #SingaporeGovernmentSecurities
Business Times
02-07-2025
- Business
- Business Times
Central banks are ditching the greenback: What's in favour instead?
[SINGAPORE] Central banks hold a variety of assets, each serving a specific purpose tied to their mandate of maintaining monetary and financial stability. Beyond mandate, a central bank's holdings are also influenced by its policy frameworks and economic conditions. Historically, the US dollar, sovereign bonds and gold are the cornerstones of many portfolios. But with market turmoil sparked by US President Donald Trump's tariff moves, the currency hit a 50-year low in the first half of 2025, tumbling by 10.7 per cent. These days, central banks are moving away from the greenback, according to a survey of 75 central banks conducted by the Official Monetary and Financial Institutions Forum (OMFIF) between March and May. The US dollar was knocked off the most popular pedestal last year to seventh place this year, according to the OMFIF survey. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The Business Times goes back to basics, and throws some light on how central banks weigh their options. What types of assets do central banks traditionally hold? The key types of assets held by central banks include: Allocating a weight to each asset The composition of what each central bank holds reflects its unique priorities – whether it's exchange rate stability, inflation targeting, or crisis response readiness. 'Some central banks may hold a larger portion in foreign exchange reserves to manage currency volatility, while others may favour gold for its role as a safe haven asset,' said Dan Chang, trading representative at PhillipCapital, in an interview with BT. Let's take the US Federal Reserve as an example. The primary assets on its balance sheet are: US Treasury securities: used for open market operations to influence interest rates and manage liquidity. Mortgage-backed securities: added post-2008 to support the housing market and credit flow. During crises, the Fed may also hold corporate bonds or other assets under emergency programmes to stabilise markets. But for the Monetary Authority of Singapore (MAS), it is different due to the Republic's exchange rate-based monetary policy framework: Since 1981, MAS has conducted monetary policy by managing the Singapore dollar exchange rate. It does not control domestic interest rates or money supply growth. Exchange rate policy is the only form of monetary policy in Singapore. It holds a significant portion of its assets in foreign reserves, which are actively managed and diversified to ensure Singapore dollar stability. Does not hold Singapore Government Securities the way other central banks hold their own bonds. Why central banks are shying away from the US dollar These are the structural factors behind this phenomenon: Economic sanctions Growing importance of emerging markets, Increased recognition of how over-reliance on a single currency exposes countries to financial and geopolitical risks, Rise of China as a trading powerhouse, and Diversification of forex reserves This steady but persistent weakening of the currency – in terms of its standing and central bank holdings of dollar-denominated assets – has been occurring for years, clarified Luca Paolini, chief strategist at Pictet Asset Management. 'Sanctions, asset freezes and US threats to suspend global economies from the Swift payment systems have made (US dollar) reserves much less safe than in the past,' he explained. Countries facing extensive US sanctions are prompted to conduct trade in non-US currencies. Naturally, the hiking of US tariffs in recent times has further eroded the status of the US dollar, and reinforces a greater need for de-dollarisation. What assets and currencies are on the rise now, and why The draw of foreign currencies, however, is more of a push factor away from the US dollar than a pull factor of other assets, in Chang's view, due to heightened geopolitical tensions and uncertainties with US President Donald Trump in power. 'It is ultimately about building a more balanced and resilient portfolio of currencies and assets to weather an increasingly complex global landscape,' he said. For gold, data released by World Gold Council (WGC) on Jun 17 reflected that among the 73 central banks polled, some 95 per cent of them indicated that they expect to continue increasing their gold holdings in the next one-year period. This is a record high since the data was first tracked in 2019, and a 17 per cent increase from last year's survey results. 'Central banks are concerned about interest rates, inflation and instability – all reasons to turn to gold to mitigate risk,' said Fan Shaokai, global head of central banks and head of Asia-Pacific (ex-China) at WGC. China's keen interest in gold China is an important player in the gold market. As at March, its official gold reserves reached 2,292 tonnes, accounting for 6.5 per cent of its total reserves. 'That rise reflects continuous buying, and this build-up isn't just symbolic, in my opinion,' said Chang. 'It's strategic.' The country's growing gold reserves support its broader goal of strengthening the renminbi's credibility and international standing. It also offers China a refuge from US dollar-centric risks such as sanctions, and supports the broader de-dollarisation push. 'By bolstering gold holdings, China signals to global markets that it is prepared for a more multipolar monetary system,' Chang added. Pros and cons of gold As a reserve asset, gold has some disadvantages. 'It is not a widely accepted means of payment – especially not in bullion form – and carries storage and refining costs. This is in addition to how it does not pay interest or offer other income streams,' Stephen Dover, chief market strategist and head of the Franklin Templeton Institute, said. 'Gold tends to lose its real purchasing power in the long run, meaning gold prices do not keep pace with inflation over a longer period of time.' Dover explained that gold can be thought of as a form of 'portfolio insurance', with the 'premiums' reflected in opportunity costs of not investing in interest-bearing instruments and by offering negative real returns. That said, gold ETFs, compared to physical gold, are seen as cost-effective with lower storage and insurance costs, and come with minimal tracking error, which means they closely mirror the actual price of gold.
Business Times
26-06-2025
- Business
- Business Times
SGS bond demand to stay high as safe havens sought amid tariff risks, Middle East tensions: RHB
[SINGAPORE] Demand for Singapore Government Securities (SGS) bonds is set to stay high amid investor caution, as traders flock to safe havens on tariff uncertainty and Middle East tensions, an RHB report said on Wednesday (Jun 25). This comes as SGS 10-year yields have trended lower since the start of the year, diverging from US treasury 10-year yields – which spiked to as high as 4.5 per cent in 2025. That was driven by tariff uncertainty, concerns about US debt levels, as well as downside sentiment arising from waning US exceptionalism and the de-dollarisation trend. With falling yields, SGS bonds have enjoyed a rally 'largely supported by traders' flight from US assets', said RHB analysts Barnabas Gan, Laalitha Raveenthar and Muhammad Fahmi Hawari. 'On a year-to-date basis, the SGS 10-year yield has dropped by 57 basis points to 2.28 per cent. In contrast, the spread between US treasury (yield) and SGS (yield) has widened to around 206 basis points,' said the analysts. 'We believe that SGS will continue to benefit from high demand from investors for a safe haven amid the backdrop of tariff uncertainty and heightened Middle East tension,' they added. US President Donald Trump acceded to a 90-day pause on all reciprocal tariffs which is ending in July. That is exempting the pause with China which started in May. Singapore assets' safe-haven appeal Pointing to Singapore's established safe-haven status, the analysts noted that the city-state's economy has earned a reputation for resilience amid uncertainty since the 2008 global financial crisis (GFC), where its recovery surpassed that of peers. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up They noted that in 2010, the Republic's gross domestic product notched double-digit growth at 14.5 per cent, which was 'significantly higher than the growth rate of other major economies', most of whom were still reeling from the aftermath of the GFC. 'This, in turn, spurred a positive sentiment towards Singapore assets, (as) the SGS 10-year (yields) trended lower at a range of 1.29 to 1.61 per cent, reflecting high inflows into Singapore from 2011 to 2012,' they said. During the pandemic, SGS yields continued to enjoy a downside bias, the analysts observed. At that time, the 10-year yields of SGS were 'comparable' to those of US treasury 10-year yields as heightened investor caution drove traders to safe havens, they said. Global uncertainty to drive risk-averse inflows With persistent global uncertainties, safe-haven assets will continue to draw 'strong demand', said the analysts. 'In such an environment, SGS... (will) continue to attract risk-averse capital inflows... despite the US' reshoring push, we maintain a downside bias for SGS yields,' they said. They noted that SGS are backed by Singapore's strong sovereign credit rating, sound fiscal position and stable macroeconomic fundamentals. Moreover, SGS have benefited from the Singapore government's high levels of governance transparency, fiscal prudence and pro-business policy. 'While structural changes in global trade may eventually shift capital allocations, in the near to medium term, elevated risk aversion and flight-to-safety behaviour are expected to exert continued downward pressure on SGS yields, reinforcing Singapore's position as a preferred financial safe haven in Asia,' they said.
New Paper
22-05-2025
- Business
- New Paper
Interest rate on CPF Special, MediSave and Retirement accounts remains at 4% for Q3 2025
The interest rate on the Central Provident Fund (CPF) Special, MediSave and Retirement accounts (SMRA) will remain unchanged at 4 per cent from July to September 2025. Savings in these accounts will earn the floor rate of 4 per cent a year in the third quarter, as the SMRA pegged rate remains below the floor rate, according to a joint statement by the CPF Board and Housing Board on May 22. The interest rate is pegged to the 12-month average yield of the 10-year Singapore Government Securities, plus 1 per cent. The interest rates for the Ordinary Account and for HDB housing loans remain unchanged at 2.5 per cent and 2.6 per cent, respectively. CPF members below 55 years old will continue to earn an extra 1 per cent interest on the first $60,000 of their combined account balances, capped at $20,000 for the Ordinary Account. Those aged 55 and above will continue to earn an extra 2 per cent interest on the first $30,000 of their combined balances, capped at $20,000 for the Ordinary Account, and an extra 1 per cent on the next $30,000. The extra interest earned on the Ordinary Account will go into a member's Special Account or Retirement Account, said the statement.
Business Times
22-05-2025
- Business
- Business Times
CPF Special, MediSave and Retirement Accounts' interest rate remains at 4% for Q3 2025
[SINGAPORE] The interest rate for the Central Provident Fund's (CPF) Special, MediSave and Retirement Accounts (SMRA) will remain at 4 per cent per annum in the third quarter of 2025 – the same as the second quarter. This is because the SMRA pegged rate continues to fall below the floor rate of 4 per cent, said the CPF Board in a joint statement issued with the Housing and Development Board (HDB) on Thursday (May 22). The SMRA interest rate is pegged to the 12-month average yield of 10-year Singapore Government Securities plus 1 per cent, and is subject to the floor rate. Similarly, the Ordinary Account's (OA) interest rate also remains at the floor rate of 2.5 per cent per annum for the third quarter, as its pegged rate remains below the floor rate. As a result, the concessionary interest rate for HDB housing loans, pegged at 0.1 per cent above the OA interest rate, will remain unchanged at 2.6 per cent a year. All CPF members will continue to earn extra interest on their CPF savings. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Members aged 55 and above will earn an extra 2 per cent interest on the first S$30,000 of their combined balances, capped at S$20,000 for the OA, and an additional 1 per cent on the next S$30,000. Those aged below 55 can expect to earn an extra 1 per cent interest on the first S$60,000 of their combined balances, also capped at S$20,000 for the OA. The extra interest earned on the OA balances will go into the member's Special Account (SA) or Retirement Account (RA). For members aged 55 and above who have joined CPF Life, extra interest will continue to apply to their combined CPF balances, including the savings used for CPF Life.
Straits Times
22-05-2025
- Business
- Straits Times
Interest rate on CPF Special, MediSave and Retirement accounts remains at 4% for Q3 2025
CPF members below 55 years old will continue to earn an extra 1 per cent interest on the first $60,000 of their combined account balances. ST PHOTO: NG SOR LUAN Interest rate on CPF Special, MediSave and Retirement accounts remains at 4% for Q3 2025 SINGAPORE – The interest rate on the Central Provident Fund (CPF) Special, MediSave and Retirement accounts (SMRA) will remain unchanged at 4 per cent from July to September 2025 . Savings in these accounts will earn the floor rate of 4 per cent a year in the third quarter , as the SMRA pegged rate remains below the floor rate, according to a joint statement by the CPF Board and Housing Board on May 22 . The interest rate is pegged to the 12-month average yield of the 10-year Singapore Government Securities, plus 1 per cent. The interest rates for the Ordinary Account, and for HDB housing loans, remain unchanged at 2.5 per cent and 2.6 per cent respectively. CPF members below 55 years old will continue to earn an extra 1 per cent interest on the first $60,000 of their combined account balances, capped at $20,000 for the Ordinary Account. Those aged 55 and above will continue to earn an extra 2 per cent interest on the first $30,000 of their combined balances, capped at $20,000 for the Ordinary Account, and an extra 1 per cent on the next $30,000. The extra interest earned on the Ordinary Account will go into a member's Special Account or Retirement Account, said the statement. Join ST's WhatsApp Channel and get the latest news and must-reads.
