Latest 6-month T-bill cut-off yield up at 3.95%; demand falls

THE latest tranche of six-month T-bills issued by the Monetary Authority of Singapore has an interest rate of 3.95 per cent, based on auction results on Thursday (Oct 26).

This is higher than the last issue – which had a cut-off yield of 3.87 per cent, but lower than the cut-off yield of 4.07 per cent offered in September.

The total amount allotted this time was S$5.7 billion, with S$2.2 billion allotted to non-competitive applications.

A total of S$11.5 billion in applications were made, and the bid-to-cover ratio was 2.02 – lower than last month’s demand, where the bid-to-cover ratio was 2.73.

Approximately 84 per cent of competitive applications made at the cut-off yield were allotted.

The median yield for this round was 3.77 per cent and the average yield was 3.6 per cent.

Notably, the issuance size of T-bills issued by the central bank has increased steadily in recent months.

Interest rates on the bonds have also risen, in line with sustained high interest rates in the US, as market watchers look to the Federal Reserve for indications of interest rate cuts in the next year.

T-bill yields hit a 30-year high of 4.4 per cent in December 2022, but have hovered mostly around the 3.7 per cent to 3.8 per cent range since March this year.

Chen Jingwei, chief investment strategist at wealth management company Wrise, thinks T-bills’ interest rates may remain around current levels for the next few months, with fluctuations from supply and demand dynamics.

He does not believe yields will continue rising to year-end, given that Singapore’s core inflation has slowed, thus reducing the need for significant yield increases.

Chen also noted that expectations of rate hikes from the Federal Reserve have diminished, evidently as yields have stabilised to just below 4 per cent since the beginning of the year.

Still, demand for the bonds will likely continue to be sustained, given its “decent returns with minimal risk, making them an attractive low-risk investment option for investors”, he added.