Latest Singapore six-month T-bill cut-off yield rises to 2.73%

[SINGAPORE] The cut-off yield for Singapore’s latest six-month Treasury bill (T-bill) rose to 2.73 per cent, the auction results by the Monetary Authority of Singapore (MAS) on Wednesday (Mar 26) showed.

This was up from the 2.56 per cent offered in the last six-month auction that closed on Mar 13. 

Demand for the latest tranche dipped. The auction received S$15.8 billion in applications for the S$7.4 billion on offer, representing a bid-to-cover ratio of 2.14.

In comparison, the previous auction received S$19.8 billion in applications for the S$7.5 billion on offer, marking a bid-to-cover ratio of 2.64. 

Median yield for the latest auction was 2.6 per cent, up from 2.5 per cent in the previous one.

Average yield climbed to 2.54 per cent, from 2.41 per cent previously.

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All non-competitive bids were allotted, amounting to S$1.4 billion, while only around 3 per cent of competitive applications at the cut-off yield were allotted.

DBS’ senior rates strategist Eugene Leow and senior foreign exchange strategist Philip Wee noted a “sizeable” decline in short-term Singapore dollar rates over the past few months, and said they “have fallen by more than their US dollar counterparts over the Fed easing cycle thus far... This appears to be (the) case across MAS bills, T-bills and Singapore Overnight Rate Average (Sora).”

Flush liquidity is likely the single largest factor causing Singdollar rates to trade so low, said Leow and Wee.

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“Going forward, the market is pricing in a much more muted path of Sora decline if the Fed cuts rates... Assuming that a long-term relationship between Singapore dollar and US dollar rates holds, a period of lower passthrough should follow the last few months of elevated passthrough.”

With the Sora-Secured Overnight Financing Rate spread priced to stabilise at 135 basis points over the longer term – from around 190 basis points currently – a partial normalisation in Singdollar liquidity may be expected going forward, they said.

Singapore will issue up to another S$450 billion in government securities, with a parliamentary motion having been passed in November last year to raise the government’s issuance limit to S$1.515 trillion, from S$1.065 trillion previously.

The new limit is expected to last until 2029.