Cut-off yield on latest Singapore 1-year T-bill slips to 3.38%

THE cut-off yield on Singapore’s latest one-year Treasury bill (T-bill) is offering a cut-off yield of 3.38 per cent, auction results released by the Monetary Authority of Singapore (MAS) indicated on Thursday (Jul 25).

This is down 0.2 percentage point from the 3.58 per cent offered in the auction for the previous one-year tranche in April.

Eugene Leow, senior rates strategist at DBS, noted that the decline in the cut-off yield was likely driven by a combination of risk aversion and increasing confidence that the US Federal Reserve will cut interest rates soon.

“It is widely expected that the Fed would embark on a series of cuts over the next few quarters. Accordingly, this should put pressure on short-term US dollar and Singapore dollar rates, including the Singapore dollar T-bill rates,” he said.

Demand for the latest tranche rose, with a total of S$15 billion in applications for the S$5.1 billion on offer, which represents a bid-to-cover ratio of 2.95.

In the previous one-year tranche, applications totalled S$10.1 billion for the S$5.1 billion on offer.

Frances Cheung, rates strategist at OCBC, said: “The lower rate view has become more entrenched, and hence investors might have preferred to lock in the one-year rate.”

She said the one-year yield suggests that investors are expecting a downside of around 50 basis points (bps) in the six-month T-bill rate in six months’ time.

Nevertheless, the downside may not be as much as 50 bps, given the recent rapid market adjustment, although she still expects short-end Singapore dollar rates to fall gradually over the course of the year.

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