Latest Singapore 6-month T-bill offers cut-off yield of 3.66%

THE cut-off yield on Singapore’s latest six-month Treasury bills (T-bills) rose to 3.66 per cent, according to auction results released by the Monetary Authority of Singapore on Thursday (Feb 15).

This was higher than the cut-off yield of 3.54 per cent offered in the previous six-month auction, which closed on Feb 1.

Demand is down in the latest auction for the T-bills. The bills received a total of S$13.5 billion in applications for the S$6.6 billion on offer, representing a bid-to-cover ratio of 2.05.

In comparison, the previous six-month tranche received S$14.6 billion in applications for the S$6.3 billion on offer.

Eugene Leow, senior rates strategist at DBS, noted that the higher cut-off is likely in response to very firm data from the US.

“Between higher-than-expected inflation and stronger-than-expected payrolls, investors are mulling a no-landing scenario where the Federal Reserve cuts later in the cycle,” he said.

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OCBC rates strategist Frances Cheung said the 12-basis-point increase in the cut-off was not out of line with the market, and was likely a result of the recent hawkish repricing of the Fed policy rate outlook.

Nevertheless, the expected direction of interest rates move remains a downward one, she added.

Meanwhile, demand in the latest auction was still decent when compared with the previous two rounds, which were overwhelming, Cheung noted.

Non-competitive applications totalled S$2 billion and were fully allotted in the latest auction.

Around 87 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.

Yield on the T-bills hit a 30-year high of 4.4 per cent in December 2022, and has hovered mostly around the 3.7 to 3.8 per cent range since March 2023.

But amid expectations of interest rate cuts in 2024, yields on the T-bills have fallen in recent issuances, down to a low of 3.54 per cent in the Feb 1 tranche.