According to the exchange, use cases for SGX’s STIR futures for SORA include allowing the hedging of up to five years of interest rate risk using 20 quarterly contracts. For instance, a company with a two-year loan tied to a floating rate can lock in a fixed rate by selling SORA futures. Should interest rates rise, the profit from the short SORA future position can offset the higher repayment on the loan.
Singapore Exchange (SGX) has listed its first three-month Singapore overnight rate average (SORA) futures contract.
The contract closely resembles short-term interest rate (STIR) futures that reference other overnight rates, reads the SGX three-month SORA futures fact sheet. The latest addition to the exchange facilitates the hedging of interest rate risks and helps in price discovery especially in the short end of the curve, says SGX in its Aug 1 statement.
