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Key 3-month Sibor continues to rally while 3-month SOR crashes

LOCAL interest rates remain very volatile amid increasing market volatility.

The key three-month Singapore interbank offered rate (Sibor) continued its upward trajectory on Thursday, though the pace eased slightly, while the more volatile three-month swap offer rate (SOR) crashed for the second day running.

On Thursday, the three-month Sibor rose to yet another high of 0.63920 per cent, up 0.00213 point from Wednesday's 0.63707. The three-month Sibor, used mainly to price home loans, is up 40 per cent from a week ago, since Jan 2, 2015.

But its more market-oriented cousin, the three-month SOR, has crashed. On Wednesday it was quoted at 0.70588 per cent, down 12 per cent from Tuesday's 0.80224. And against Monday's high of 0.92956 per cent, the three-month SOR, used typically for commercial loans, has plunged 24 per cent. The SOR reflects Sibor and Singapore dollar fluctuations.

But Saktiandi Supaat, Maybank's head of FX research, warned that the volatility is far from over as the US dollar's strength is likely to continue.

"The expectations in SGD has come off, there was a bit of overshooting, but is this temporary?" posed Mr Supaat.

He said that SOR tends to move first as it is more market-oriented while the Sibor lags because it's what banks charge each other.

He noted that the Singapore dollar strengthened on Thursday - it was 1.3416 at 1am, up 0.3 per cent to 1.3381 around 6.28pm.

"It's very volatile, oil is not helping, euro is not helping, Greece is not helping," he said.