Latest T-bill yield rebounds slightly to 3.74% amid buoyant demand

THE latest six-month Treasury bill (T-bill) issued by the Monetary Authority of Singapore on Thursday (Jan 4) posted a cut-off yield of 3.74 per cent.

This is up slightly from the previous tranche’s 3.73 per cent, but the same as the yield posted two tranches ago.

The total amount applied for in this round was the same as last month’s, at S$12.8 billion. The bid-to-cover ratio was 2.09 times.

The sustained demand could be coming from investors looking for a safe place to park their spare cash amid the uncertain economic environment, said Gerald Wong, founder and chief executive of investment advisory platform Beansprout.

“The lower interest rates offered for the latest Singapore Savings Bond and selected fixed deposit accounts may have also shifted investors’ attention towards the T-bill,” he added.

A total of S$6.1 billion was allotted – with S$2.4 billion of it to non-competitive bids, and the remainder to competitive bids.

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About 66 per cent of competitive bids were allotted at the cut-off yield.

The bonds will be issued on Jan 9 and mature on Jul 9.

T-bills piqued investor interest after interest rates rose to a high of 4.4 per cent in December 2022. Interest rates on the bonds have since eased, falling below the 4 per cent mark.

Despite this, market watchers believe that the prevailing rates, at high 3-per-cent levels, are still attractive, compared to previous levels of near 1 per cent. This round’s yields were also largely in line with market expectations, after the Fed last month announced sooner-than-expected rate cuts in 2024.

“T-bill cut-offs are still stuck in range, and this will likely be the case until Fed cuts are imminent,” said Eugene Leow, senior rates strategist at DBS.

Victor Yong, a rates strategist from UOB, said that the yield on T-bills could remain within its recent range for most of the first half of the year, and be adjusted lower in the second half, assuming the first Fed cut occurs in the middle of the year.

However, US and Singapore bond yields are still expected to trend lower through the year, given that the 2024 US Fed rate-cut scenario is “most probable” this year, he added.