Chart of the Day: SOR and SIBOR to remain volatile in the next months

Until position unwinding is completed.

The 3-month SOR has dipped below 1%, followed by SIBOR too.

According to a report by OCBC, post-MPS, SGD SOR have slumped and SIBOR has followed, albeit at a slower pace. The 3-month SOR now hovers around 0.73% at today’s fixing, with the 3-month SIBOR around 15bps higher at 0.88%, given the unwinding of SGD positions after MAS kept its S$NEER policy stance unchanged, contrary to market consensus expectations but in line with OCBC’s forecast.

OCBC adds that this current dip in short-term interest rates, amounting to 40bps for the 3-month SOR and 14bps for the 3-month SIBOR, may have a little more room to run until position unwinding is completed, but is not expected to be a permanent reversal in trend.

With global and regional growth dynamics largely sticking to the script for now, and domestic inflation concerns have essentially faded (with headline and core CPI forecast at 0% and 1% respectively for 2015), key will be the Fed’s normalization intentions going forward.

OCBC’s updated end-2015 3- month SIBOR and SOR forecasts stand at 1.32% and 1.35% respectively.