Yield on latest Singapore 6-month T-bill rises to 3.83%; demand slips for latest SSB issuance

THE cut-off yield on Singapore’s latest six-month Treasury bill (T-bill) has risen to 3.83 per cent, according to auction results released on Wednesday (Apr 26).

The yield is higher than the 3.75 per cent offered in the previous six-month T-bill auction, although demand for the government-backed, risk-free fixed-income product has slipped.

The latest tranche of the T-bills was around 2.2 times subscribed for the S$5 billion allotment.

The total value of applications in this auction was S$11.1 billion, down from the S$12.3 billion in the previous six-month T-bill auction.

DBS senior rates strategist Eugene Leow noted that while yields are higher, retail investors just do not seem to have as much interest in the T-bills as before.

Singapore’s T-bills attracted strong investor interest last year as their yield hit a 30-year high of 4.4 per cent for the six-month tenor in December, on the back of rising interest rates globally. Demand has since fallen in tandem with yields.

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Leow noted that technical factors – which includes tight liquidity at the month end – may have also contributed to the spike in the latest auction’s cut-off yield, although this will unlikely be sustained.

In the latest T-bill auction, non-competitive bids totalled S$669 million and were fully allotted.

Those who submitted competitive bids at the cut-off yield were allotted around 37 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.

Demand for the Singapore Savings Bonds (SSBs) also fell in the latest tranche, according to allotment results released on Wednesday.

Some S$705.5 million in applications were received for the S$700 million on offer.

Of the total applications received, S$697.2 million was applied within individual allotment limits and allotted.

Meanwhile, the previous tranche of the government-backed bonds received a total of S$758.1 million in applications, with some S$751.3 million applications allotted using the quantity ceiling format.

The latest tranche was offering a first year interest rate of 3.03 per cent, and a 10-year average return of 3.07 per cent.

In comparison, the previous issuance had a first year interest rate of 3.01 per cent and a 10-year average return of 3.15 per cent.

Leow said demand for SSBs seems to be very sensitive to yields. With the 10-year average return for May lower than April, this may explain the decline in demand.

In March, analysts said that interest in SSBs may rise as investors try to lock in higher yields amid increasing concerns about recession.

An analyst also noted that the recent bank failures had altered views on fixed income instruments, and he expected fixed income buyers may require a higher return or a higher discount moving forward.

Nevertheless, Leow said that institutional investors appear a lot more worried about recession risks than the retail investors.

He added that the reopening of a five-year Singapore Government Securities (SGS) bond, for which auction results were also released on Wednesday, registered a cut-off yield at 2.77 per cent, compared to its pre-auction yield at around 2.82 per cent.

Successful applications for both the T-bills and SSBs will be issued on May 2.