Latest Treasury bill yields 4.28% in Singapore’s last auction for 2022

IN THE last six-month Treasury bill (T-bill) issuance of the year, the cut-off yield managed to stay above 4 per cent, at 4.28 per cent when auction closed on Wednesday (Dec 21).

The risk-free fixed income security with an allotment size of S$4.4 billion had a bid-to-cover ratio of 2.7, meaning it was 2.7 times subscribed. Bidders who put in a non-competitive bid were all fully allotted, while competitive bidders with a bid at cut-off yield managed to get 80 per cent of their applications fulfilled.

Eugene Leow, DBS senior rates strategist, said that T-bill rates will probably be somewhat buoyant in the coming few months, as the Federal Reserve is likely to deliver a few more hikes in early 2023 before a pause takes hold. However, the MAS bills auctions have shown that short-term Singapore dollar (SGD) rates are moderating.

“With US CPI (consumer price index) cooling off, upward pressures on short-term US dollar and SGD rates would probably also taper off in the coming few months before stabilising through 2023,” Leow said.

A fortnight ago, the cut-off yield was a 30-year high at 4.4 per cent for an allotment of S$4.6 billion.

T-bills have received explosive investor interest lately, as the cut-off yield climbed from 0.48 per cent in January to 4.4 per cent early this month against a backdrop of steep interest rate hikes by the United States central bank.

The Singapore government issued a total of S$112.7 billion worth of six-month T-bills this year, attracting S$267.4 billion in aggregate applications at an average subscription rate or bid-to-cover ratio of 2.4 times.

In the Nov 10 auction, investors poured in a massive S$14.2 billion in a record-high volume of 92,000 applications, and caused a delay of auction results by over five hours. In that auction, non-competitive applicants for the first time this year did not manage to get full allotment, as the total value of such bids amounted to 80.4 per cent of the issuance.

In an auction, up to 40 per cent of the total issuance amount will be allotted to non-competitive bids first. If the amount of non-competitive bids exceeds 40 per cent, the bond will be allocated to non-competitive investors on a pro-rated basis, with the balance of the issuance amount going to competitive bids, from the lowest to highest yields.

The non-competitive applicants state only the amount to invest and accept the cut-off yield. Investors who would want to invest only if the yield is above a certain level submit competitive bids.

T-bills are issued at a discount, and investors get back the full face value at maturity. The bills can be purchased with cash, Supplementary Retirement Scheme funds or Central Provident Fund (CPF) monies, although investors who choose to use their CPF savings have to drop in personally at the branches of any of the trio of local banks.

The CPF Board has earlier stated that the banking trio are targeting to allow online applications for Singapore Government Securities products, including Treasury bills, using CPF funds, in the first quarter of 2023.