OPINION: U.S. Fed Holds the Fuse to Singapore’s Bubble Time Bomb

Financialsense.com, 24 Jan 2014
Singapore’s benchmark interest rate, the SIBOR, is tied to the U.S. Fed Funds Rate to minimise large swings in the USD-Singapore dollar exchange rate. Low interest rates are a direct cause of credit bubbles, and Singapore is no exception.
Since the SIBOR is used to price most of the loans and mortgages in Singapore, a very low SIBOR means cheap credit for Singaporeans. The ratio of household debt to gross domestic product now stands at around 75%, up from 55% in 2010 and 45% in 2005, according to data compiled by Standard Chartered.
Furthermore, 70% of those loans have floating interest rates, meaning that once the Fed tapers, mortgage repayments will increase too, possibly exposing unsustainable debt in the system. Full story
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