World’s End Close, Edinburgh
The events in the past week may be telling us that we could be one step closer to the end of the world. Ok, that’s a bit of an exaggeration, but these were significant events. US just lost its AAA rating for the first time. That means a loss of confidence in the US in their ability to repay their debt, and more so, a loss of confidence in the governance of the country. This has major repercussions on the financial system, especially the currency.
SOR 3-months has just fallen from 0.25% to 0.23% over the last 3 trading days as the Singapore Dollar (vs USD) rises from 1.2885 to 1.27966 over the same period.
With the US bent on devaluating the USD and MAS allowing the SGD to appreciate, SOR was driven into its all-time-low territory again, coming in at 0.247% on 3 Nov 2010. Moreover, the Feds initiated a fresh round of measures to spur the US economy, keeping rates at 0-0.25% for an “extended period” and launching a new massive US$600 billion money printing exercise.
SOR slid dramatically to 0.258% on Aug 23, arguably the historical low of all times, then sprang up again to above 0.3%. Incidentally, the 3-month USD Libor rate is also at 0.3% and has been falling and staying low. Exchange rate wise, USD/SGD has been stable at around 1.35 and probably did not play a big factor in the action of SOR.
News about home loan rates appear in the newspaper very sparingly, and this just happened last Saturday, showing up in the Straits Times with the headline “Cheaper home loans in store”. In a gist, the article says that “KEY interest rates that determine mortgage levels have fallen steeply, promising cheaper home loans but even leaner times for those with bank deposits. “¦ The falling rates have followed the trend of the rates set by the United States Federal Reserve, which continue to be at historic lows. They have also come as the Singdollar has been allowed to strengthen since April.”
I have mentioned in my previous post that those of us who have taken up a SOR or SIBOR pegged loan may find ourselves at risk of having to pay a 1.5% penalty when doing a full redemption not on the rate repricing date.
SOR fell to 0.31%, presumably the all time low. This is probably a result of the revaluation of SGD against USD from 1.39 to below 1.38, which makes it cheaper to repay loans denominated in US dollar.