Cut-off yield on latest 6-month T-bill slips to 3.74% as demand rises

THE latest Singapore six-month Treasury bill (T-bill) is offering a cut-off yield of 3.74 per cent, according to auction results released on Thursday (Dec 7).

This is down from the cut-off yield of 3.8 per cent offered in the previous six-month tranche of the T-bills, issued on Nov 28.

Demand for the T-bills has remained strong in recent issuances. A total of S$13.3 billion in applications was received for the S$5.9 billion on offer in the latest tranche, representing a bid-to-cover ratio of 2.25.

This is up from the previous tranche, which received S$13 billion in applications for the S$6 billion on offer. This represents a bid-to-cover ratio of 2.17.

Aaron Chwee, head of wealth advisory at OCBC, noted that the demand and yield of the latest tranche were within expectations, given that markets are predicting the US will cut interest rates in March 2024.

“What we see is that investors are looking to lock in attractive yields on short-term bills while they can,” he said.

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Chwee noted that Singapore’s bond yields follow the US’ closely, and are even sometimes more attractive because the Republic has maintained its AAA credit rating while the US is facing some concerns.

“This has kept demand for Singapore T-bills and Singapore government securities high, especially as we are facing a possible US recession in 2024,” he added.

Some 95 per cent of non-competitive applications, amounting to S$2.4 billion, were allotted in the latest auction.

Meanwhile, around 21 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, but have mostly hovered around the 3.7 per cent to 3.8 per cent range since March this year. Yields crossed the 4 per cent mark for the first time since January in the auction that closed on Sep 28.