Latest 6-month Singapore T-bill offers cut-off yield at 3.75%

THE latest six-month Singapore Treasury bill (T-bill) closed its auction on Thursday (Apr 13) with a lower cut-off yield of 3.75 per cent.

While the yield is down from the last auction’s cut-off yield of 3.85 per cent, there was a higher demand for the S$4.8 billion on offer in this round’s auction.

The total value of applications in this auction was S$12.3 billion, representing a bid-to-cover ratio of 2.6, and up from the S$9.6 billion in applications in the previous six-month T-bill auction.

Interest in the T-bills have come down since interest rates fell from their peak in December 2022. But investors remain cautious of market volatility and have been watching for the impact of the banking crisis in the past month.

During the previous auction, market watchers noted that the bank failures have stoked speculation that the US Federal Reserve may have to cut rates earlier than initially anticipated, which resulted in investors flocking to money market funds and Treasuries or bills in the US.

In a report on Monday, UOB’s global economics and markets research team noted that markets are priced for imminent Fed rate cuts.

But the UOB analysts added that some upside yield calibration in the short term was possible, as they found the rate cuts “hard to reconcile outside a hard-landing scenario”.

Nevertheless, the team expects bond yields will drift lower across 2023.

In the latest T-bill auction, non-competitive bids totalled S$955.7 million and were fully allotted.

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Those who submitted bids at the cut-off yield were allotted around 45 per cent of their application.

Meanwhile, those who specified a lower yield were fully allotted, and those who specified a higher yield were not allotted.

Singapore’s T-bills attracted strong investor interest last year as their yield hit a 30-year high of 4.4 per cent for the six-month tenor in December, on the back of rising interest rates globally.

Demand has since fallen in tandem with yields.