Chart of the Day: 3-month SIBOR up 1.51% at end-March

Fixed deposit rates from Singapore banks rose concurrently by 17-30 bps.

This chart from RHB Research shows that Singapore interest rates have risen as seen with the 3-month SIBOR, which grew to 1.51% from 1.37% at the beginning of March.

RHB analyst Leng Seng Choon revealed that DBS increased its 3-month fixed deposit rates over the previous four weeks by 30bps to 0.9% at end-March and UOB likewise by 17bps to 1.48%. “Other banks have also raised their fixed deposit rates over the past month,” he added.

“This would be positive overall for banks’ net interest margins (NIM),” Leng said.

RHB said whether the SIBOR will rise or not depends on the Monetary Authority of Singapore’s (MAS) Monetary Policy Statement (MPS) to be announced next week.

Leng said if MAS tightens at this month’s MPS, there could be some short-term weakness in SIBOR. “This could temporarily slow the trend of NIM widening for Singapore banks, although we believe the longer term trend of NIM widening remains intact. We believe the market’s concern of this outcome has partly contributed to the recent weakness in DBS’ share price,” he added.

However, if MAS were to maintain a neutral stance, “Singapore banks’ NIM widening is likely to quicken in the months ahead,” Leng noted.

The general sentiment is the MAS will exit its neutral stance and tighten monetary policy. Specifically, some analysts think the trade tensions sparked by US and China’s tariffs on each other could dent growth and weigh on how the MAS will respond to it through policy tightening.