Latest Singapore six-month T-bill cut-off yield falls to 2.3%

[SINGAPORE] The cut-off yield for Singapore’s latest six-month Treasury bill (T-bill) fell to 2.3 per cent, according to auction results released by the Monetary Authority of Singapore on Wednesday (May 7). 

This declined from the 2.38 per cent cut-off yield offered in the previous six-month auction that closed on Apr 24, marking the fourth consecutive issuance in which yields have fallen since Mar 26.

Demand for the latest tranche rose slightly as the auction received S$17.1 billion in applications for the S$7.4 billion on offer, representing a bid-to-cover ratio of 2.32. This was up from the previous auction which received S$16.6 billion in applications for the S$7.4 billion on offer, translating to a bid-to-cover ratio of 2.24.

Median yield for the latest auction stood at 2.24 per cent, lower than the 2.32 per cent median yield in the previous round. Average yield fell to 2.09 per cent, down from 2.16 per cent previously. 

All non-competitive bids were allotted, with a total of S$1.5 billion, compared with S$1.4 billion in the previous auction. For competitive applications, around 23 per cent were allotted at the cut-off yield, up from 17 per cent at the previous auction.

The declining yields come as short-end Singapore dollar interest rates continue to slide after a period of consolidation in January, said Cheong Wei Ming, portfolio manager of fixed income at Eastspring Investments.

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He added: “This development aligns with the market’s expectations from anticipating less than two rate cuts at the beginning of the year to currently pricing in about three-and-a-half cuts.”

The auction’s “solid” bid to cover ratio of 2.32 implied that investors adjusted their return expectations, said OCBC head of foreign exchange and rates strategy Frances Cheung, given the broader downtrend in interest rates.

The forward trajectory of Singdollar rates will likely hinge on the Trump administration’s policy decisions and narratives, noted Eastspring’s Cheong. Macroeconomic data would also shape the Federal Reserve’s policy outlook, and hence interest rates, he added. He projected that Singdollar rates would maintain lower volatility compared to US dollar rates, as Singdollar liquidity conditions remain flushed.

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In November last year, the government passed a parliamentary motion to issue an additional S$450 billion in government securities, raising the government’s borrowing limit to S$1.515 trillion, from S$1.065 trillion previously. The new limit is expected to last until 2029.