Singapore’s latest six-month Treasury bill offers 4.2% yield
Tan Nai Lun
THE cut-off yield for Singapore’s first six-month Treasury bill (T-bill) auction this year closed at 4.2 per cent on Thursday (Jan 5).
Cut-off yield for the risk-free fixed income product, backed by the Singapore government, have been on the rise in recent months amid steep interest rate hikes by the US Federal Reserve.
The T-bills were around 2.6 times subscribed for the S$4.7 billion allotment in the latest auction. Non-competitive bids, which totalled S$1.4 billion in the latest auction, were fully allotted.
Those who submitted bids at the cut-off yield were allotted around 27 per cent of their applications. Meanwhile, those who specified a lower yield were fully allotted, and those who specified a higher yield were not allotted.
The total value of applications in this auction was S$12 billion, up from S$11.8 billion in the last auction in 2022.
Eugene Leow, senior rates strategist at DBS, noted that the cut-off yield was within expectations. He said: “Liquidity in Singapore appears to be improving, and we have seen bill auctions by the Monetary Authority of Singapore also showing rates coming off. I think these bill rates have either topped out or are topping out.”
Looking ahead, Leow expects short-term Singapore dollar rates will plateau. “There will unlikely be any meaningful downside unless the Fed cuts rates, something there we think might happen in 2024 or perhaps late 2023,” he added.
Yield on T-bills hit a 30-year high of 4.4 per cent in December last year on the back of rising interest rates globally, and attracted strong investor interest.
In a T-bill auction, up to 40 per cent of the total issuance amount will first be allotted to non-competitive bids. If the amount of non-competitive bids exceeds 40 per cent, the bond will then be allocated to non-competitive investors on a pro-rated basis, with the balance going to competitive bids, from the lowest to highest yields.
T-bills are issued at a discount, and investors get back the full face value at maturity. The bills can be purchased with cash, Supplementary Retirement Scheme funds or Central Provident Fund monies.
