Cut-off yield on latest Singapore 6-month T-bill rises to 3.8%

SINGAPORE’S latest six-month Treasury bill (T-bill) is offering a cut-off yield of 3.8 per cent, according to auction results released by the Monetary Authority of Singapore on Thursday (Feb 29).

This is a jump from the 3.66 per cent offered in the previous six-month auction, which closed on Feb 15.

The latest tranche received S$12.4 billion in applications for the S$6.4 billion on offer, representing a bid-to-cover ratio of 1.94.

In comparison, the previous six-month tranche received S$13.5 billion in applications for the S$6.6 billion on offer.

OCBC rates strategist Frances Cheung said the outcome still came as a mild upside surprise, even though she had expected a cut-off that was higher than the 3.66 per cent offered in the previous auction.

This was likely due to the recent hawkish repricing of the US dollar rates curve. Some investors may have also chosen to stay on the sidelines ahead of the release of inflation data in the US, she said. 

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

But Cheung expects the hawkish repricing to come to a pause, hence the level of today’s yield may not be sustained.

Meanwhile, Winson Phoon, head of fixed income research at Maybank Securities, said T-bill yields may stabilise at around the current level in the next auction, as there is still ample Singapore dollar liquidity and the auction size could be trimmed slightly.

To a large extent, however, this will depend on the front-end yield direction of the US Treasuries in the coming weeks, he said.

Phoon said it is not surprising that yields went up further in Thursday’s auction given the hawkish repricing. The markets are now pricing for only about three rate cuts in total this year, compared with six about a month ago, he noted.

Yields on the bills are determined via competitive auctions in a market that comprises individuals and institutions from Singapore and overseas, and therefore reflect the general level and direction of interest rates in global markets, said Finance Minister Lawrence Wong.

This was in a response to parliamentary questions on T-bill interest rates on Tuesday.

Wong noted that retail demand for T-bills have strengthened in the past two years, as yields on T-bills increased alongside comparable instruments such as US Treasuries amid rising interest rates.

Allotments to retail investors have grown from around 13 per cent of each issuance in 2022, to around 46 per cent of each issuance in 2024, he said.

DBS senior rates strategist Eugene Leow noted that current yield levels look elevated, and expects this may entice greater demand in the next auction.

Non-competitive applications totalled S$2.4 billion and were fully allotted in the latest auction.

Around 9 per cent of competitive applications at the cut-off yield were allotted. Those who specified a lower yield were fully allotted, and those who specified a higher yield were not allotted.

T-bill yields hit a 30-year high of 4.4 per cent in December 2022, and have mostly hovered around the 3.7 to 3.8 per cent range since March 2023, amid the high interest-rate environment.

But yields started to fall at the end of 2023 as the market expected the US Federal Reserve to cut interest rates, hitting a one-year low of 3.54 per cent in the Feb 1 auction.