In a surprising development, the Singapore dollar Swap Offer Rate (SOR) turned negative for the first time on August 10th due to inflows into the Singapore dollar. In this article we’ll explore what the SOR is, why it turned negative, and what impact that has on the banks, borrowers and depositors.

What is SOR?

SOR is the effective cost of borrowing SGD synthetically through borrowing USD for 3 months and swapping out the USD in return for SGD for the same maturity.

The other commonly used benchmark is SIBOR (Singapore Interbank Offered Rate), which is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore wholesale money market (or interbank market).

The Association of Banks in Singapore is the fixing authority for both rates.

Some of the differences between the two:

1. SIBOR is determined by the ...