Implications of MAS policy on SGD rates

It is believed that re-centring would provide the best outcome for fixed income markets as markets price out uncertainty around 'further' MAS easing. On the other hand, a move to a zero slope would be the worst outcome for SGD rates across the term structure, as the positive FX carry of past few years disappear. A band widening, would also result in weakening of the bond curve. Lastly, no policy change, barring a near-term profit taking would result in sustained upward pressure on rates. 

"In a zero-slope environment, we forecast 6m SOR would rise to 2.25-2.40%; in a re-centring scenario (and assuming the city-state's growth picks up), we believe the SOR would decline modestly, slipping to about 1.40% according to our analysis. Given the uncertainty around the policy outcome, we do not believe the market is priced for the MAS to ease. Given market pricing, the possible implications for 6m SOR under different MAS decisions, we believe risk/reward still favours a bearish stance toward SGD rates.", says Barclays.