MAS Becomes First Asian Government Entity to Issue RFR Debt

Source: Regulation Asia Manesh Samtani, Regulation Asia 2020-08-20

Singapore is seen to be leading Asia in its preparation for the cessation of LIBOR at the end-of 2021. Earlier this month, MAS announced new initiatives to catalyse SORA markets.

MAS (Monetary Authority of Singapore) auctioned SGD 500 million of six-month notes with a spread over the compounded SORA on Tuesday (18 August), Bloomberg reported.

The move makes MAS the first government entity in Asia to auction notes under a new risk-free rate. Not even the US Treasury has issued debt linked to SOFR, its new risk-free-rate.

Other debt securities have also already been issued off SORA, including floating-rate notes issued by DBS in May, and a SORA-based corporate loan issued by OCBC to property developer CapitaLand in June.

A number of major banks in Singapore including Deutsche Bank, Standard Chartered Bank, Citibank and DBS were also said to be ready to trade SORA derivatives since June.

Singapore is seen to be leading Asia in its preparation for the cessation of LIBOR at the end-of 2021, in part due to its plan for SORA to replace both SOR and SIBOR.

Hong Kong, on the other hand, is adopting a multi-rate approach, where both the risk-free-rate HONIA and HIBOR will coexist.

While the HKMA (Hong Kong Monetary Authority) has encouraged banks to issue new HONIA products, there is less incentive to do so because they will still be able to reference HIBOR well beyond 2021.

Earlier this month, MAS announced a number of initiatives aimed at catalysing greater activity in SORA markets, safeguard the benchmark’s integrity and enhance market confidence in SORA.

Among the initiatives, MAS said it would issue SORA-based floating rate notes on a monthly basis, which it said would facilitate the benchmark’s adoption by providing a pricing reference for SORA cash products and spurring hedging activities through the SORA derivatives market.

MAS also said it would publish daily statistics involving SORA; Compounded SORA rates for 1-month, 3-month and 6-month tenors; and a SORA Index that will facilitate calculation of Compounded SORA over specified periods.

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MAS Becomes First Asian Government Entity to Issue RFR Debt

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