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SINGAPORE’S EXPERIENCE IN DEVELOPING THE GOVERNMENT BOND MARKETS

SINGAPORE’S EXPERIENCE IN DEVELOPING THE GOVERNMENT BOND MARKETS. Yeo Lian Sim Assistant Managing Director (Capital Markets) Monetary Authority of Singapore. PRESENTATION OVERVIEW. Objectives & Requirements Building Blocks Current Issues. Why develop a Government bond market?.

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SINGAPORE’S EXPERIENCE IN DEVELOPING THE GOVERNMENT BOND MARKETS

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  1. SINGAPORE’S EXPERIENCE IN DEVELOPING THE GOVERNMENT BOND MARKETS Yeo Lian Sim Assistant Managing Director (Capital Markets) Monetary Authority of Singapore

  2. PRESENTATION OVERVIEW • Objectives & Requirements • Building Blocks • Current Issues

  3. 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.

  4. The Benefits Of Well Developed Bond Markets... To better match long-term financing needs Increased efficiency through liquid markets Mobilize domestic savings for investments Enhance spectrum of investment options

  5. Equities Bonds ISSUER / INVESTOR BASE Complexity Derivatives Deposits Risk/Return

  6. Equities ISSUER / INVESTOR BASE Complexity Derivatives Deposits Risk/Return

  7. The Benefits Of Well Developed Bond Markets... To better match long-term financing needs Increased efficiency through liquid markets Mobilize domestic savings for investments Enhance spectrum of investment options Stronger position to attract and retain issuers, investors, and intermediaries

  8. NECESSARY COMPONENTS Vibrant Bond Market • Conducive Environment • regulatory and tax structure • disclosure and information flow Good Trading & Settlement Infrastructure Presence of Ancillary Services Pool of Fixed Income Professionals

  9. Issuers - domestic & foreign - corporates and public sector Intermediaries with expertise in arranging issues Participants in the Debt Market Investors - Fund Managers - Insurance Companies - Financial Institutions - Pension Funds - Retail Primary Dealers for market making

  10. FOSTERING A VIBRANT GOVERNMENT SECURITIES MARKET... • Step up Government Securities Issuance 76.6% increase ----------------------------

  11. 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

  12. Daily Turnover in Government Securities

  13. Issuers - domestic & foreign - corporates and public sector Intermediaries with expertise in arranging issues Participants in the Debt Market Investors - Fund Managers - Insurance Companies - Financial Institutions - Pension Funds - Retail Primary Dealers for market making

  14. NON-GOVERNMENT ISSUERS OBJECTIVES INITIATIVES • 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

  15. Corporate Debt Issuance

  16. Issuers - domestic & foreign - corporates and public sector Intermediaries with expertise in arranging issues Participants in the Debt Market Investors - Fund Managers - Insurance Companies - Financial Institutions - Pension Funds - Retail Primary Dealers for market making

  17. DEVELOPING INVESTOR BASE OBJECTIVES INITIATIVES • 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

  18. BROADEN INVESTOR BASE Foreign Domestic Inactive Active

  19. FOREIGN PARTICIPATION HAS BENEFITS... - Additional pool of funds - Introduces expertise and specialised knowledge - Enhances speed of market development - Develops ties to international markets

  20. … AND IMPLICATIONS - Greater responsiveness to news leading to increased price volatility - Down-turn in bond market may lead to currency outflows

  21. 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

  22. CURRENT ISSUES • Investor Education • Market Transparency • Corporate Governance • Electronic and Internet Revolution • Asian Bond Market

  23. THANK YOU

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