Latest Singapore six-month T-bill cut-off yield down at 1.85%

The cut-off yield on Singapore’s latest six-month Treasury bill (T-bill) tumbled to 1.85 per cent, based on auction results released by the Monetary Authority of Singapore on Thursday (Jul 3).

This is a decline from the 2 per cent offered in the previous six-month auction that closed on Jun 19. It is the lowest level that yields have hit in the year to date and marks the eighth consecutive issuance since Mar 26 for which yields have declined.

Demand for the latest tranche rose. The auction received a total of S$16.1 billion in applications for the S$7.5 billion on offer, representing a bid-to-cover ratio of 2.15. In comparison, the previous auction received a total of S$15.9 billion in applications for the S$7.5 billion on offer, representing a bid-to-cover ratio of 2.13.

Median yield for the latest auction stood at 1.76 per cent, down slightly from 1.95 per cent in the previous round. The average yield decreased to 1.64 per cent, from 1.88 per cent previously.

All non-competitive bids were allotted, amounting to S$1.5 billion, while around 41 per cent of competitive applications at the cut-off yield were allotted.

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.

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The new limit is expected to last until 2029.

Eugene Leow, DBS head of fixed-income research, highlighted that investor demand for Singapore dollar assets remains strong.

“Amid Singapore dollar strength, there has been persistent downward pressure on Singapore dollar interest rates. More recently, speculation that the Fed (US Federal Reserve) may resume cutting rates in H2 may have contributed to the lower cut-off,” Leow said.

OCBC’s head of foreign exchange and rates strategy Frances Cheung and foreign exchange strategist Christopher Wong pointed to Singapore dollar rates having moved into lower ranges as the currency’s liquidity is flush.

“Short-end Singapore dollar rates may be capped at (the) 1.8 to 2 per cent level ... but we do note (that) front-end Singapore dollar rates have been volatile,” Cheung and Wong said.

They added: “Singapore Government Securities (SGS) stand to benefit from safe-haven (and) diversion flows. Long-end SGS exhibit relative value on the steepness of the curve, while short-end bonds may further outperform swaps.”