Cut-off yield on latest 6-month Singapore Treasury bill rises to 3.98%

THE auction of Singapore’s latest six-month Treasury bill (T-bill) closed with a cut-off yield of 3.98 per cent on Thursday (Mar 2).

The T-bills – a risk-free fixed-income product, backed by the Singapore government – were around 2.8 times subscribed for the S$4.7 billion allotment in the latest auction.

The total value of applications in this auction was S$13 billion, up from the S$11 billion applied in the previous auction.

T-bills had attracted strong investor interest last year as yields hit multi-year highs amid interest rate hikes by the US Federal Reserve. But enthusiasm waned after yields started to come down in recent months.

Yields in the latest auctions have bucked that trend, however, with Feb 16’s auction closing with a cut-off yield of 3.93 per cent. This was compared to Feb 2’s auction that had a cut-off yield of 3.88 per cent.

In a report on Mar 1, UOB’s global economics and markets research team noted that in February, inflation data released in the US showed that inflation appears to be stickier-than-expected.

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This triggered investors to re-evaluate their previously dovish take on the US Fed Funds pricing profile, which reduced the gap between policy guidance and market expectations, the research team said.

In the latest auction on Mar 2, non-competitive bids totalled S$702 million and were fully allotted.

Those who submitted competitive applications below the cut-off yield were fully allocated. Meanwhile, those who specified the cut-off yield or a higher yield were both not allocated.

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

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 monies.