Yield on latest 6-month Singapore T-bill falls to 4%

SINGAPORE’S latest six-month Treasury bill (T-bill) closed its auction with a cut-off yield of 4 per cent on Wednesday (Jan 18).

The yield on the risk-free fixed-income product, backed by the Singapore government, appears to have peaked. Yields have stayed at elevated levels 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$5 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 16 per cent of their application. 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$13.1 billion, up from S$12 billion in the first auction of 2023.

Eugene Leow, senior rates strategist at DBS, noted that demand has come in stronger for the auction. He added: “T-bills appear to be stabilising as market participants mull the possibility that the Fed might be nearing the end of the hike cycle.”

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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.