3M SIBOR VS FDR (FIXED DEPOSIT RATE)
- Deposit-based mortgage peg (DBS FHR18 denoted by the black line and OCBC 36FDMR by the red line which was just launched in Oct 2015)) is less volatile than SIBOR (narrower swings from peak to trough)
- In periods of rising interest rate, deposit-based mortgage peg is preferred as it lags behind SIBOR and does not go up as much as SIBOR
- The converse happens when interest rate is on its way down and SIBOR would be a better choice
- However the correlation between the two seems to go off after 2003 when SIBOR which tracks rates in the United States trends up hitting the most recent high of 3.56% in Jun 2006 but deposit rates stay depressed locally; however we are not exactly sure if this scenario will repeat itself as the deposit rates used (18 month for DBS and 36 month for OCBC) for the new loan pegs does not depict pure cost of funds for the banks going forward.