singapore’s experience in developing the government bond markets yeo lian sim assistant managing...
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SINGAPORE’S EXPERIENCE IN DEVELOPING THE GOVERNMENT BOND
MARKETS
Yeo Lian SimAssistant Managing Director (Capital Markets)
Monetary Authority of Singapore
Objectives & Requirements
Building Blocks
Current Issues
PRESENTATION OVERVIEW
Why develop a Government bond market?
- To cater for budget deficits in the first instance
but more than that…
- To develop the broader bond market.
Enhance spectrum of investment options
The Benefits Of The Benefits Of
Well Developed Bond Markets...Well Developed Bond Markets...
To better match long-term financing needs
Increased efficiency through liquid markets
Mobilize domestic savings for investments
ISSUER / INVESTOR BASE
Complexity
Risk/Return
Deposits
BondsEquities
Derivatives
ISSUER / INVESTOR BASE
Complexity
Risk/Return
Deposits
Equities
Derivatives
Enhance spectrum of investment options
The Benefits Of The Benefits Of
Well Developed Bond Markets...Well Developed Bond Markets...
To better match long-term financing needs
Increased efficiency through liquid markets
Mobilize domestic savings for investments
Stronger position to attract and retain issuers, investors, and intermediaries
NECESSARY COMPONENTS
Presence of Ancillary Services
Pool of Fixed IncomeProfessionals
Good Trading & Settlement Infrastructure
Conducive Environment• regulatory and tax structure• disclosure and information flow
Vibrant Bond Market
Investors - Fund Managers- Insurance Companies- Financial Institutions- Pension Funds- Retail
Intermediarieswith expertise in arranging issues
Primary Dealers for market making
Issuers - domestic & foreign - corporates and public sector
Participants in the
Debt Market
FOSTERING A VIBRANT GOVERNMENT SECURITIES MARKET...
Step up Government Securities Issuance
22.2 23.1
29.5
36.140.8
0
5
10
15
20
25
30
35
40
1996 1997 1998 1999 1H 2000
S$b
----------------------------
76.6% increase
FOSTERING A VIBRANT GOVERNMENT SECURITIES MARKET...
Step up Government Securities Issuance
Extend Yield Curve
Improve Information Flow
Increase Number of Primary Dealers
Develop Repo Market
Develop Interest Rate Swap Market
404
534
874
602
966
0
200
400
600
800
1000
1996 1997 1998 1999 1H 2000
S$m
Daily Turnover inDaily Turnover in Government Securities Government Securities
Daily Turnover inDaily Turnover in Government Securities Government Securities
Investors - Fund Managers- Insurance Companies- Financial Institutions- Pension Funds- Retail
Intermediarieswith expertise in arranging issues
Primary Dealers for market making
Issuers - domestic & foreign - corporates and public sector
Participants in the
Debt Market
NON-GOVERNMENT ISSUERS
Diversified issuer base
Range of different credits and industries
Broad range of debt structures
Encourage statutory boards, local corporates and MNCs bond issues
Allow foreign entities to issue S$bonds under MAS 757
Develop the asset securitisation market
OBJECTIVES INITIATIVES
6.9 7.8 8.7
21.119.6
0
5
10
15
20
25
S$
Bil
lio
n
1996 1997 1998 1999 1H 2000
Corporate Debt IssuanceCorporate Debt IssuanceCorporate Debt IssuanceCorporate Debt Issuance
Investors - Fund Managers- Insurance Companies- Financial Institutions- Pension Funds- Retail
Intermediarieswith expertise in arranging issues
Primary Dealers for market making
Issuers - domestic & foreign - corporates and public sector
Participants in the
Debt Market
DEVELOPING INVESTOR BASE
Diversified investor base
Tapping retail investors
Increased activity from institutional investors
Develop asset management industry
Liberalise investments of Central Provident Fund savings
Tax incentives for bond fund managers and bond investments
OBJECTIVES INITIATIVES
BROADEN INVESTOR BASE
Inactive Active
Foreign
Domestic
FOREIGN PARTICIPATION HAS BENEFITS...
- Additional pool of funds- Introduces expertise and specialised
knowledge- Enhances speed of market
development- Develops ties to international markets
… AND IMPLICATIONS
- Greater responsiveness to news leading to increased price volatility
- Down-turn in bond market may lead to currency outflows
INFRASTRUCTURE
Efficient settlement and clearing procedures to reduce settlement risk and transaction cost 1986 book-entry securities, DVP & finality in MAS’ books 1998 Real-Time Gross Settlement
CDP linked to regional and international clearing systems for better foreign investor access
CURRENT ISSUES
Investor Education
Market Transparency
Corporate Governance
Electronic and Internet Revolution
Asian Bond Market
THANK YOU