HOW GLOBAL MARKET PROVIDENCE FUELED MAS S$21B NET PROFIT FOR Y/E 31 MAR 2026
Before anyone brings out the champagne one has to understand that MAS is not a for-profit entity and therefore profitability is not a measure of its performance. As a central bank, apart from its regulatory function and leadership role in the development of the financial industry, its core mission is to manage the general price level (inflation) and liquidity in the financial market. The measure of its performance is not determined by its profitability. MAS could have managed inflation well and yet be making losses. Whether MAS has managed its mission well, I leave it to the reader's opinions. I just want to talk about its financials.
MAS financial performance is fundamentally dependent on 2 factors:
1. The SGD exchange rate trend
2. Market Externalities - interest rates, equities market
The FY2025/2026 financial results illustrate the profound tension between MAS’s domestic policy objectives and international market externalities. On the domestic front, in facing a rising SGD trend, the central bank steadfastly prioritized its monetary mandate, by orchestrating market intervention purchase of foreign currencies, knowingly accepting immense currency translation losses at the cost of a stronger currency. Internationally, it confronted a high-yield, booming equity landscape over which it exercised zero control. Bound by strict institutional guardrails that treat the Official Foreign Reserves as a liquidity shield rather than a profit center, MAS is conceptually constrained from altering its portfolio to capture gains or mitigate risks. In essence, the destiny of the MAS balance sheet and financial performance remains tethered to the whims of global macroeconomic tides.
In simple terms, MAS takes neither blame for losses, nor credit for profits, in each financial year, by staying disciplined in carrying out its mission. This is a fact most people do not comprehend.
The exchange effect:
SGD is a managed float currency. That means the exchange rate is allowed to move freely within an allowed band. This is the Singapore Dollar Nominal Effective Exchange Rate. The S$NEER is computed on a basket of undisclosed currencies. When the rate drops to the lower band threshold, MAS buys SGD and sells foreign currencies which will pull the rate up. Conversely, when the rate is breaching the upper band, MAS sells SGD and buys foreign currencies to force the rate down. This way, MAS can can prevent intraday rate volatility. But if prolonged trend is in one direction, whether up or down, MAS will tighten or loosen the S$NEER accordingly to let the SGD find its market equilibrium.
Going into the market to buy or sell SGD is called foreign exchange market intervention. MAS does this every business day.
If the trend is a downward movement of the rate, that means MAS must have on hand sufficient foreign currencies to buy back SGD. The foreign currencies held to protect the SGD is called the Official Foreign Reserves. It is generally thought a sufficient level is about 65%-75% of GDP.
The trend in 2025/2026 is an upward movement of the rate, that means MAS must have enough SGD to buy foreign currencies. This is not a problem because all central banks can just print its domestic currency. When MAS buys foreign currencies, all it has to do is simply credit a counterparty bank's SGD account at MAS. There are 3 consequences on the Profit & Loss:
(a) SGD funding cost:
MAS is pumping SGD into the market. Too much SGD liquidity is inflationary. To counter this, MAS issues MAS Bills. Banks or investors buy these securities which results in Banks' SGD account at MAS being debited. This is called sterialisation, withdrawing the SGD from the market. This creates a liability on MAS books which results in interest payments reflected in the P&L. All MAS purchase of foreign currencies are sterialised.
In 2026 MAS Bills outstanding was S$390Bn, an increase of S$53Bn. Interest payment is aggregated in the S$2.4Bn "money market operations loss + admin expenses".
(b) FX trading loss:
In a trending SGD appreciation, MAS makes trading losses, the figure is embedded deep in the S$2.4 MMO loss line. MAS makes spot purchase of foreign currency to force the SGD rate down. By delivery date 2 days later, the rate is presumably down. This will cause a realised FX trading loss because the foreign currency received would then be worth less against the base currency (SGD) book rate. (See my ebook on Amazon "How Banks Treat FX On Multi-Currency Accounting")
(c) Unrealised currency revaluation P&L
The US-SGD rate chart above shows the SGS appreciation trend. On 1 Apr 2025 the rate was 1.34331 and 31 Mar 2026 was 1.29221, an increase of 3.8%.
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The buying of foreign currencies causes MAS balance sheet build up of foreign assets. These are translated to base currency SGD at the year-end. When SGD appreciates, the base (book) rates used for currency translation rises. The foreign assets translate to lower values in SGD terms, causing an unrealised currency revaluation loss. As the Managing Director mentioned, there was a S$16.4Bn revaluation loss in 2025/2026.
A side-note:
In the past, Singapore has been suspected of adopting unfair trade practices by persistently buying foreign currencies to keep the exchange rate artificially low in order to boost exports. The fact that MAS refused to publish data on its market intervention supports the suspicion. This is because if the data shows a persistent one way intervention of buying foreign currency, this reflects possibility of exchange rate manipulation. Singapore has always maintained the S$NEER is to prevent intra-day volatility, not to gain unfair trade advantage. To offer more transparency, and build trust, MAS started to publish market intervention report in 2019. But this only shows a 6-monthly net of its trading transactions. The latest report "Net purchase of FX from intervention operations" on MAS website (see here) shows from 1 Jul 2019-30 Jun 2025 a consistent massive net buying of foreign currencies. Only the last 6 months 1 Jul 2025-31 Dec 2025 there was Zero net Intervention (buying cancelling out selling). This reflects a long term trend of SGD appreciation consistent with the chart above.
The market externalities effect:
The market intervention purchasing foreign currencies results in MAS books holding a class of foreign assets called the Official Foreign Reserves. The purpose of this OFR is principally to defend the SGD and sometimes, provide for temporary liquidity. When looking at the massive OFR, it is a common misconception to think it represents the financial strength of MAS. Many mistake this as part of Singapore's national reserves. This is merely foreign assets acquired from market intervention. For every asset, there is a liability. The OFR may be reflected on the liabilities side by the MAS Bills, Capital + Reserves, or some other liabilities.
To serve its purpose of protecting the SGD, the OFR must be parked in assets that can be easily liquidated and used to buy back SGD when rates are going down. The conceptual bind is liquidity over returns. For this purpose, MAS maintains the Three-Tranche Portfolio Architecture
The Liquid Tranche (Bonds & Cash):
This tranche acts as MAS's immediate shield for currency market intervention. The Goal - absolute capital preservation and instant availability. The Assets are high-grade foreign government bonds (primarily US Treasuries) with short maturities, and overnight cash deposits. Yield is a secondary focus here. These assets must be ready to be liquidated in seconds if MAS needs to step into the market to buy SGD and defend the currency band.
This tranche reacts aggressively to global central bank policies. The yield shifts higher or lower almost instantly in lockstep with the foreign central bank's policy rate, requiring zero portfolio turnover.
For those papers turned over during the year, the yield impacts the P&L. These papers are very short term. To maintain the portfolio, MAS continuously roll them over. As one matures, a new paper is purchased with higher yields because interest rates are rising. During 2025/2026 short term interest of all major currencies were rising. This tranche captured the peak short-term interest rates (3.5%–4.5%) offered by global central banks through the continuous turnover of short-term T-bills. Because this layer is restricted to short-term sovereign debt and cash balances, its returns are tightly capped by the stated interest rate. While it delivers billions in steady, high-quality coupon income, its upside is structurally limited to those fixed yields, and it does not enjoy any compounding "market revaluation".
The Investment Tranche (Equities & Corporate Bonds):
This tranche is where MAS actively pursues higher underlying investment gains to outpace global inflation. The Goal - maximizing total return through global economic growth. The Assets are a diversified mix of global developed-market equities, emerging-market stocks, and investment-grade corporate bonds. This tranche captures the massive global market rallies (like the one seen in FY2025/2026). It acts as the primary defense against the structural currency translation losses caused by a strengthening SGD.
The Investment Tranche is structurally designed to hold global equities and corporate bonds to build long-term purchasing power. In FY2025/2026, global financial and equity markets experienced an exceptional bull run. Because MAS holds a vast portfolio of diversified international stocks and higher-yielding corporate credit, this tranche captured a massive wave of capital revaluation gains and equity dividend payouts. Equity market performance is highly non-linear. During a booming year, a 15% to 20% surge in stock indexes shifts the profit needle by tens of billions of dollars, vastly outpacing what fixed-income yields can generate on a percentage basis.
The effect on P&L:
Equities made massive capital gains from the foreign bull run, and bonds earned higher yields in rising interest rates during the year, returning a S$39.8Bn in Investment Income.
On the downside, bonds meet the headwinds of rising rates with nowhere to hide. Price and yields move in opposite directions. Price comes into play only at reporting date as the papers are marked-to-market. MAS faced a sweeping global bond revaluation challenge. Bonds across the US, UK, and Europe suffered parallel paper capital drops on MAS’s balance sheet at the same time. This repricing loss is netted off in the S$39.8Bn Investment Income.
The market intervention purchasing foreign currencies results in MAS books holding a class of foreign assets called the Official Foreign Reserves. The purpose of this OFR is principally to defend the SGD and sometimes, provide for temporary liquidity. When looking at the massive OFR, it is a common misconception to think it represents the financial strength of MAS. Many mistake this as part of Singapore's national reserves. This is merely foreign assets acquired from market intervention. For every asset, there is a liability. The OFR may be reflected on the liabilities side by the MAS Bills, Capital + Reserves, or some other liabilities.
To serve its purpose of protecting the SGD, the OFR must be parked in assets that can be easily liquidated and used to buy back SGD when rates are going down. The conceptual bind is liquidity over returns. For this purpose, MAS maintains the Three-Tranche Portfolio Architecture
The Liquid Tranche (Bonds & Cash):
This tranche acts as MAS's immediate shield for currency market intervention. The Goal - absolute capital preservation and instant availability. The Assets are high-grade foreign government bonds (primarily US Treasuries) with short maturities, and overnight cash deposits. Yield is a secondary focus here. These assets must be ready to be liquidated in seconds if MAS needs to step into the market to buy SGD and defend the currency band.
This tranche reacts aggressively to global central bank policies. The yield shifts higher or lower almost instantly in lockstep with the foreign central bank's policy rate, requiring zero portfolio turnover.
For those papers turned over during the year, the yield impacts the P&L. These papers are very short term. To maintain the portfolio, MAS continuously roll them over. As one matures, a new paper is purchased with higher yields because interest rates are rising. During 2025/2026 short term interest of all major currencies were rising. This tranche captured the peak short-term interest rates (3.5%–4.5%) offered by global central banks through the continuous turnover of short-term T-bills. Because this layer is restricted to short-term sovereign debt and cash balances, its returns are tightly capped by the stated interest rate. While it delivers billions in steady, high-quality coupon income, its upside is structurally limited to those fixed yields, and it does not enjoy any compounding "market revaluation".
The Investment Tranche (Equities & Corporate Bonds):
This tranche is where MAS actively pursues higher underlying investment gains to outpace global inflation. The Goal - maximizing total return through global economic growth. The Assets are a diversified mix of global developed-market equities, emerging-market stocks, and investment-grade corporate bonds. This tranche captures the massive global market rallies (like the one seen in FY2025/2026). It acts as the primary defense against the structural currency translation losses caused by a strengthening SGD.
The Investment Tranche is structurally designed to hold global equities and corporate bonds to build long-term purchasing power. In FY2025/2026, global financial and equity markets experienced an exceptional bull run. Because MAS holds a vast portfolio of diversified international stocks and higher-yielding corporate credit, this tranche captured a massive wave of capital revaluation gains and equity dividend payouts. Equity market performance is highly non-linear. During a booming year, a 15% to 20% surge in stock indexes shifts the profit needle by tens of billions of dollars, vastly outpacing what fixed-income yields can generate on a percentage basis.
The effect on P&L:
Equities made massive capital gains from the foreign bull run, and bonds earned higher yields in rising interest rates during the year, returning a S$39.8Bn in Investment Income.
On the downside, bonds meet the headwinds of rising rates with nowhere to hide. Price and yields move in opposite directions. Price comes into play only at reporting date as the papers are marked-to-market. MAS faced a sweeping global bond revaluation challenge. Bonds across the US, UK, and Europe suffered parallel paper capital drops on MAS’s balance sheet at the same time. This repricing loss is netted off in the S$39.8Bn Investment Income.
Both Liquidity and Investment Tranches of the OFR are subject to currency translation for reporting purposes. When the base currency SGD appreciates, these foreign currency assets throw up unrealised currency translation losses reflected in the S$16.8Bn Currency Revaluation Loss.
The Gold Tranche (Hard Assets):
This forms a smaller, structural anchor within the reserves portfolio. The Goal - hedging against tail-risk events and systemic global financial shocks. MAS has steadily increased its gold reserves over recent years to diversify away from pure fiat currency exposure.
Gold is an accounting anomaly in most central banks. Under International Financial Reporting Standards (IFRS), physical gold is classified as a commodity which has to be reported at lower of cost and net realisable value. But central bank accounting treat it at great defiance to IFRS on the basis of cost. Gold is booked at cost in SGD term thus has no impact on P&L.
An Escape Valve for OFR:
An OFR the size of 65%-75% of GDP is thought to be optimum for Singapore. As at 30 Mar 2026 the OFR stood at S$542Bn, an increase of S$28Bn over 31 Mar 2025. The OFR carries a currency risk that MAS cannot mitigate. It has to carry the market risk. Thus any excess over its requirement carries an unnecessary currency risk. A couple of yeas back, MAS created an ingenious new mechanism to take the excess OFR off its book. This is the Reserves Management Government Securities. It is a non-tradeable SGD security issued by the government fully subscribed by MAS, to be held to maturity or redeemable on notice, paid for and repayable in foreign currencies. .
The Ministry of Finance transfers the foreign currency proceeds of the RGMS to Temasek to invest. On maturity or redemption, MOF repays MAS in the foreign currencies. The exchange rate is based on the date of the transactions on subscription and repayment legs. Thus effectively it means MAS has transferred the exchange risk to Temasek, which, as a commercial entity, has strategies to hedge the risk.
The official explanation for the RGMS is to allow MAS to transfer excess OFR to the sovereign wealth fund which can invest in longer term and better ROI assets. In reality, it is an escape valve for MAS to mitigate currency risks on excess OFR assets. Another benefit is, without RGMS, the OFR has no cap which may lead to excessive position which can again trigger accusations of currency manipulation.
MAS balance sheet intertwined to USD
MAS investment portfolio is not transparent as to its currency risk and market exposure. But certainly USD is the predominant anchor of Singapore's OFR. Because MAS channels a large portion of its Liquid Tranche into short-term US T-bills, Singapore’s balance sheet is deeply intertwined with US fiscal policy. This creates a unique set of structural exposures:
The Sovereign Credit Risk Paradox: - Short-term US T-bills are globally treated as "risk-free" assets because the US can print dollars to pay its obligations. However, the sheer volume of US debt refinancing means MAS is highly exposed to US political and fiscal gridlock (such as debt ceiling standoffs). A technical US default or credit downgrade would immediately disrupt the pricing and liquidity of MAS's core intervention shield.
The Currency Trap (The S$NEER Conflict) - When expansionary US fiscal policy feeds inflation, the Federal Reserve raises interest rates, causing MAS’s interest income to boom. However, these high rates also strengthen the USD globally. To manage the S$NEER target and prevent imported inflation, MAS is forced to sell USD and buy SGD. This structural intervention means MAS must constantly deploy and exhaust the very USD reserves it is accumulating.
Yield Curve Volatility - If the US Treasury oversupplies short-term bills to fund its deficits, it distorts the yield curve (steepening or flattening it artificially). MAS must constantly adjust its portfolio math because US fiscal choices directly dictate the benchmark yields for the entire global banking system.
Summary:
Of the S$21.0Bn profits, MAS was able to contribute S$1.0Bn to the Consolidated Fund for budget 2026/2027 fiscal spending. The balance goes into it's General Reserves. This S$20.0Bn contributes to an increase in the National Reserves since MAS' net assets form part of the country's reserves.
No doubt there will be many who question why in hard times the MAS did not contribute more to the budget. The reason is it can't because much of it's profits come from unrealised earnings from revaluation of the Investment Tranche of the OFR. It is paper profit that may be wiped out next year if the market crashes.
The financial performance of MAS in FY2025/2026 underscores the paradox of central banking in a small, open economy. While MAS actively guided the appreciation of the SGD to counter inflation, it remained a passive price-taker against surging global asset returns and rising interest rates. Safeguarding the OFR requires prioritizing liquidity over profit maximization, meaning MAS could neither actively capitalize on global market peaks nor evade foreign exchange translation headwinds. Ultimately, because monetary policy mandates entirely dictate portfolio behavior, MAS's Profit & Loss statement is fundamentally a byproduct of global market providence, with due respects to Mr Chia and his hardworking team at the central bank.
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