This document provides an overview of money markets in Singapore and India. It discusses the key money market instruments in Singapore, including treasury bills, certificates of deposits, commercial papers, banker's acceptances, and repurchase agreements. It notes that Singapore's money market is regulated by the Monetary Authority of Singapore and consists of various short-term borrowing and lending between banks and financial institutions. The document also briefly compares Singapore's money market to India's, noting that India's is regulated by the Reserve Bank of India and that rates are determined by market forces rather than regulation.
3. Money Market
๏ Money Market one of the sections of a financial
market where securities and financial instruments with
short-term maturities are traded is called the money
market. Financial assets like treasury bills, certificates
of deposits, commercial paper and bankers'
acceptance are some of the short-term debt securities
traded in the money market.
๏ The maturity period of these instruments may range
from overnight to an year.
๏ The Government and Businesses resort to money
market to manage their Short-term cash needs.
๏ Hence, it is considered to be the Best source to invest
in liquid assets.
4. Money Market in Singapore
๏ In Singapore, the money market consists of
various banks and financial institutions and is
regulated by the Monetary Authority of
Singapore (MAS).
๏ The Singapore money market consists of various
liquid and short-term borrowing and lending.
Some of the money market instruments in the
market are: Treasury Bills, commercial papers,
certificate of deposits, etc.
6. ๏ Treasury Bills
๏ Treasury bills are sold at a price less than their par
value. When they mature, the issuer will pay the
holder of the T-bill an amount equivalent to its par
value.
๏ T-bills donโt pay out interest. Instead, the interest is
included in the price discount. Hence, the 'interest'
earned on them is the difference between the
purchase price and its par value.
๏ On behalf of the Singapore Government,
the
Monetary Authority of Singapore issue T-bills of 3month and 1-year maturities.
๏ Both Singaporeans and foreign residents can invest in
treasury bills. There are also no restrictions to non-
7. ๏ Treasury Bills
๏ Treasury bills are denominated in nominal values
of SGD1,000 and traded at a rate of discount
basis.
๏ You can sell your T-bills before maturity but the
price will be subjected to market forces.
8. ๏ Certificate of Deposits
๏ In Singapore, Certificate of Deposits are called
Singapore Dollar Negotiable Certificate of
Deposits. It is a financial instrument usually in
bearer form issued by a bank acknowledging the
deposit of a specific sum of money for a fixed
period of time at a fixed rate. It is issued in
Singapore dollars.
10. ๏ Commercial Papers
๏ There are many commercial banks in Singapore
which issue Commercial papers for:
1. 3-months:
Average Yield Percentage (APY):
0.08% to 0.35%.
2. 6-months: APY ranges from 0.10% to 0.5%.
3. 1 year: APY ranges from 0.10% to 0.75%.
๏
Some of the major players are: Maybank
Singapore,
Standard
Chartered
Bank
Singapore, OCBC, UOB Singapore, HSBC
Singapore, Citibank Singapore, etc.
11. ๏ Bankerโs Acceptance
๏ A short-term debt instrument issued by a firm that is
guaranteed by a commercial bank. Banker's
acceptances are issued by firms as part of a
commercial transaction. They are traded at a discount
from face value on the secondary market, which can
be an advantage because the banker's acceptance
does not need to be held until maturity. Banker's
acceptances are regularly used financial instruments
in international trade.
๏ These are considered to be relatively safe
investments, since the bank and the borrower are
liable for the amount that is due when the instrument
matures. This is especially useful when the
creditworthiness of a foreign trade partner is
unknown.
13. ๏ Repurchase Agreements
๏ Repurchase transactions, called Repo or Reverse
Repo are transactions or short term loans in which
two parties agree to sell and repurchase the same
security. They are usually used for overnight
borrowing.
๏ Under the agreement the seller sells specified
securities with an agreement to repurchase the same
at a mutually decided future date and price. Similarly,
the buyer purchases the securities with an agreement
to resell the same to the seller on an agreed date at a
predetermined price. Such a transaction is called a
Repo when viewed from the perspective of the seller
of the securities and Reverse Repo when viewed from
the perspective of the buyer of the securities
14. ๏ Repurchase Agreements in Singapore:
๏ Singapore has an active repurchase market. Itโs
size is approximately S$25 million.
๏ There are two types of repurchase agreements in
Singapore:
1.
2.
๏
general collateral repurchases, and
specific repurchases.
The Monetary Authority of Singapore (MAS)
adopts the Public Securities Association (PSA)
or International Securities Market Association
(ISMA)
Global
Master
Repurchase
Agreement
in
relation
to
repurchase
transactions.
15. ๏ Repurchase Agreements in India:
๏ In India, Repo/Reverse Repo transactions can be
done only between the parties approved by RBI
and in RBI approved securities viz. GOI and State
Govt Securities, T-Bills, PSU Bonds, FI Bonds,
Corporate Bonds etc
16. Comparison of Singapore Money
Market with Indian Money Market
๏ The Reserve Bank of India is the regulator of
money market in India. The Singaporean money
market is regulated by the Monetary Authority of
Singapore.
๏ The rates of the money market in Singapore are
regulated by the MAS, in India however, the rates
are determined by the market forces.
๏ The Singaporean Financial market (including the
money market) is highly developed. The Indian
money market is in a relatively nascent stage.
๏ Both the Indian and Singaporean Money Markets
offers a variety of money market instruments.
