Cut-off yield on latest Singapore 6-month T-bill falls slightly to 3.73%

THE latest Singapore six-month Treasury bill (T-bill) is offering a cut-off yield of 3.73 per cent, according to auction results released on Wednesday (Dec 20).

This is slightly lower than the 3.74 per cent on offer in the previous six-month tranche, which closed on Dec 7.

Demand for the T-bills remained strong, although it has slid slightly from the previous tranche. The latest issuance received S$12.8 billion in total applications for the S$5.6 billion on offer, representing a bid-to-cover ratio of 2.29.

In comparison, the previous issuance received S$13.3 billion in applications for the S$5.9 billion on offer.

The cut-off yield was largely in line with expectations, analysts noted.

While the US market has frontloaded rate-cut expectations, there may be a degree of caution in the Singapore dollar (SGD) space, said Eugene Leow, senior rates strategist at DBS.

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“With data in the US still relatively firm, it is not clear that imminent rate cuts are in the offing. Accordingly, we should not expect SGD T-bill rates to fall meaningfully just yet,” he said. 

OCBC rates strategist Frances Cheung added that the fall in SGD rates has lagged the decline in US dollar rates, thus the cut-off had not been affected much.

Cheung expects SGD rates will be on a gradual downward trend in 2024, but it will likely lag movement in US dollar rates.

Demand should also stay strong as rates remain relatively high compared to historical levels, she said.

Meanwhile, Rachana Mehta, co-head of fixed income at Maybank Asset Management Singapore, noted that the Fed’s announcement had likely affected the demand and cut-off yield to some extent, as the yield was at the lower end of expectations.

She expects the yield to come off slowly as the Fed starts cutting rates in the second half of 2024, although demand should still remain strong as long as yields are above 3.5 per cent.

Non-competitive applications totalled S$2.2 billion and were fully allotted in the latest auction.

Meanwhile, around 90 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 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.