THE ASSOCIATION OF BANKS IN SINGAPORE WINS!

Some people have been asking. How? Interest rates will rise boh? Will it be volatile? How will it affect my bank loan?

This afternoon's nugget of news from the Association of Banks in Singapore seem to confirm that.

If rates do not change much and stays at rock bottom lows, what's there need to know about it? 

ABS decides now a good time to charge people for information on the ever changing (and likely) rising SIBOR.

See bor?

See liao bor?

FEDERAL RESERVE FUNDS RATE TARGET

The Wall Street Journal wrote about the US Federal Reserve's challenge in communicating its plan for the path of rate increases till end-2017.

But chief among my main concerns is the difference between market expectations and the Fed's projections. More than 100bps in end-2017!

Of course, no one party could be right. But what you do in reaction matters.

Cheerios.

MAS PHASES IN BORROWING LIMITS ON UNSECURED CREDIT

This means anyone taking personal loans, loans for buying home appliances/furniture etc.

And oh. Credit cards as well. I spoke about it some posts back.

The good thing is the hit would be phased in. The inferred bad thing is, the situation on the ground is not all that rosy. But steps are taken with the relevant help agencies like CCS ever ready.

If you notice the phasing in period ends in July 2019. Perhaps that is MAS' take on when 'peak interest rates' will occur?

SINGAPORE SAVINGS BOND...THE NET EFFECTS

The Monetary Authority of Singapore (MAS) has released more information on the Singapore Savings Bond (SSB). I will leave you to click on the link to find out more about the SSB.

But what's the effects of issuing such bonds?

1.  Another debt instrument is launched to borrow from the public. This time, aimed specifically at individuals, made easier to procure and with 'safeguards' to assure the retail investor.

2.  As suggested by the Business Times article, the SSB would give fixed depos a run for their money. I think it will also grab some share from the ordinary savings accounts, dividend yielding counters on SGX and perhaps even some ETFs. The example cited in the SSB link mentioned a range of 0.9 to 3.3% returns...averaging 2.4%. It should be close.

3.  Banks will likely react. Stocks may drop further to increase their yields and attractiveness.

4.  Will MAS raise rates sans the Feds? Maybe?

BORROWERS UPSET OVER HIKE IN MARGIN FOR SIBOR LOANS

The Straits Times' Money section had the following headline boldly emblazoned on page C5 this morning: 'Borrowers upset over hike in margin for Sibor loans'. 

The article goes on to explain that the anger was directed to the larger spreads and subsequent increase in payments to be borne by the borrower.

CASE felt that the increase in spreads should be clearly explained and justified by the banks in question.

Citibank seemed to have caved in slightly at the end of the article by making some concessions. I wonder if they were under any duress then.

But in any case, that's how banks make money from the retail borrower. Scalping you via the spreads. 

Perhaps it is time to refinance or reprice for some of those who took up loans in 2010 and 2011. 

The swinging good times of cheap credit is ending. Yellen reiterated that it would be sometime in 2015. 

SIDEWAYS

The past 12 months have seen an upswing in local and foreign equity markets. By foreign I mean USA, European and Asian ones.

I suspect markets have been pumped in the last one year for institutions to offload at their convenience. It does not help that ECB has started on their bazooka move of QE. But it is still early days as to whether it is any effective.

I see next week's 18 March FOMC meeting as crucial as market watches look to the FEDs for signals to raise rates. However, I am of view that most people are looking to the wrong thing. Interest rates will rise, it is only a matter of 'when'. To me, it does not matter if it is June or Sep 2015. I am not going to trade the markets in those three months of respite if rates rises only in Sep. 

I will just sit pretty and watch the slide.