THE cut-off yield on the latest Singapore six-month Treasury bill (T-bill) slid to 3.4 per cent, based on auction results released by the Monetary Authority of Singapore (MAS) on Thursday (Aug 1).
This was a 0.24 percentage point drop from the 3.64 per cent offered in the previous six-month auction, which closed on Jul 18.
Demand rose in the latest tranche, which garnered a total of S$18 billion in applications for the S$6.8 billion on offer, representing a bid-to-cover ratio of 2.65.
The previous auction received S$15.7 billion in applications for the S$6.8 billion on offer, representing a bid-to-cover ratio of 2.3.
The median yield in the latest auction stood at 3.3 per cent, down from 3.5 per cent in the previous auction. The average yield fell to 2.85 per cent from 2.97 per cent previously.
All non-competitive applications totalling S$2.6 billion were allocated in the latest auction. Some 43 per cent of competitive applications were allotted at the cut-off yield.
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Eugene Leow, senior rates strategist at DBS, said that the six-month cut-off yield was “very low” and close to the one-year T-bill cut-off yield, which stood at 3.38 per cent at the latest auction on Jul 25.
“There seems to be a fear-of-missing-out grab for yield following increasing signs that the Fed may be about to embark on an easing cycle,” he said.
On Wednesday, US Federal Reserve chief Jerome Powell signalled that policymakers may lower interest rates at their next meeting in September, as inflation rates fall towards the central bank’s 2 per cent target.
T-bill yields hit a 30-year high of 4.4 per cent in December 2022 amid a high-interest-rate environment.
On Thursday, MAS also opened the latest tranche of Singapore Savings Bonds (SSBs).
The SSBs, which will be issued in September, offer a first-year interest rate of 3.06 per cent, and a 10-year average return of 3.1 per cent.
In comparison, the July tranche offered a first-year interest rate of 3.19 per cent, and a 10-year average return of 3.22 per cent.
The one, two, five and 10-year benchmark SGS yields are used as reference to calculate the step-up coupon rates for SSBs.
Demand for SSBs has declined in recent tranches.
The demand for the December 2023 tranche of SSBs reached S$1.9 billion in applications for the S$1 billion on offer, whereas the latest July 2024 tranche of SSBs pulled in S$969 million in applications for the same amount offered.
