Singapore 3 Month SOR and SIBOR Rising

Chart 1 shows the 3m SOR vs SIBOR over 5 years. The reason that SOR is lower than SIBOR most of the time is that USDSGD weakened over the last 5 years. It is only in the last 4 months that SOR rose from 0.25% to 0.55%, because USDSGD strengthened.

 

Why did USDSGD strengthen? Because there is fear in the market and most investors are liquidating their funds and repatriating them back to the US. It is also due to loss of faith in the monetary system, causing investors to flock to hard currencies like the USD. in extreme distress, even gold cannot save you. Only USD can. The third reason for SOR to strengthen is that banks are running out of USD. The most important currency in the world is in short supply because every investor is hoarding it.

Chart 2 is a 3 month snap shot of the SOR vs SIBOR. It shows the SOR surpassing SIBOR in the last 4 months. The SIBOR is more stable than SOR because it is an agreement by the association of banks in Singapore, not subject to the whims of currency speculators.

 

Chart 3 is very interesting. It shows that even the SIBOR rose recently from 0.344 to 0.398%. Since SIBOR is not affected by the USD, it is an indication of Singapore bank's distress. If you think that the stress in EU is far away and will not affect Singapore's banks, you are wrong. Even Singapore banks are starting to be a little more jittery than usual.

 

The rise in SOR and SIBOR continued dispite the EUR489 billion of liquidity pumped into the system to quell the distress. It may indicate that the liquidity flush is not working. This is worrying because the so-called "big bazooka" by the ECB has failed to calm the financial system.

The world is still in a heightened state of stress and I will be very cautious about investing in any form of risk assets at the moment.