THE cut-off yield on Singapore’s latest six-month Treasury bill (T-bill) rose to 3.02 per cent, according to auction results released by the Monetary Authority of Singapore on Thursday (Dec 19).
This was a slight increase from the 3 per cent offered in the previous six-month auction that closed on Dec 5.
Frances Cheung, head of foreign exchange and rates strategy at OCBC, said that the cut-off yield was within expectations.
“Moving forward, the trajectory of interest rates and cut-offs may, however, not be in a straight line, in light of how market expectation on interest rates keep changing alongside the ever-evolving growth and inflation outlook, coupled with uncertainty on US fiscal and tariff policy,” she added.
On Wednesday, the US Federal Reserve cut interest rates by a quarter point, bringing the target range to 4.25 to 4.5 per cent, while signalling that it would slow the pace at which borrowing costs fall any further.
On a whole, Cheung expects some downward room for short-end Singapore dollar rates, though interim upticks cannot be ruled out.
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Eugene Leow, head of fixed income research at DBS, said that the downside to short-term Singdollar rates such as T-bills is likely limited, with market participants becoming more aware that the Fed has less room to cut rates in recent times.
“While (Jerome) Powell signalled further cuts, the reality is that if there is no further progress on inflation or the deterioration in the labour market, rate cuts will be challenging,” he said.
Demand for the latest tranche fell. The auction received a total of S$15.8 billion in applications for the S$6.8 billion on offer, representing a bid-to-cover ratio of 2.33.
In comparison, the previous auction received S$17.4 billion in applications for the S$7.1 billion on offer, representing a bid-to-cover ratio of 2.45.
Median yield for the latest auction stood at 2.95 per cent, up from 2.9 per cent in the previous auction.
Average yield decreased to 2.66 per cent, from 2.73 per cent previously.
Non-competitive bids totalled S$2.3 billion and were fully allotted. About 10 per cent of competitive applications at the cut-off yield were allotted.
Singapore will issue up to another S$450 billion in government securities, after a parliamentary motion was passed in November to raise the government’s issuance limit to S$1.515 trillion from S$1.065 trillion previously. The new limit is expected to last until 2029.
