[SINGAPORE] The cut-off yield for Singapore’s latest six-month Treasury bill (T-bill) fell to 2.2 per cent, according to auction results released by the Monetary Authority of Singapore on Thursday (May 22).
This is a drop from the 2.3 per cent cut-off yield offered in the previous six-month auction that closed on May 7. It is the fifth consecutive issuance for which yields have declined since Mar 26, and is the lowest level yields have hit in the year to date.
Demand for the latest tranche rose as the auction received S$18.1 billion in applications for the S$7.5 billion on offer, representing a bid-to-cover ratio of 2.41. This was up from the previous auction, which received S$17.1 billion in applications for the S$7.4 billion on offer, translating to a bid-to-cover ratio of 2.32.
The median yield for the latest auction stood at 2.18 per cent, lower than the 2.24 per cent median yield in the previous round. Average yield dipped to 2.07 per cent from 2.09 per cent previously.
OCBC’s head of foreign exchange and rates strategy Frances Cheung said that the cut-off yield of 2.2 per cent is on the low side of expectations, despite investor demand remaining strong, indicated by the bid/cover ratio of 2.41 times.
“Investors appear willing to accept slightly lower returns as the Singapore dollar liquidity is flush, while T-bills and Singapore Government Securities are highly rated, which may also be benefiting from safe-haven flows,” she said.
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She noted the volatility of the external environment, indicated by US dollar rates fluctuating in wide ranges, which may have some spillover onto Singapore dollar rates.
“In the near term, we will watch the progress of the US tax cut bills, and auction performances in other markets to gauge the overall bond market sentiment,” she said.
All non-competitive bids were allotted, with a total of S$1.5 billion, unchanged from the previous auction. Around 59 per cent of the competitive applications were allotted at the cut-off yield, up from 23 per cent at the previous auction.
In November last year, the government passed a parliamentary motion to issue an additional S$450 billion in government securities, raising the government’s issuance limit to S$1.515 trillion, from S$1.065 trillion previously. The new limit is expected to be in force until 2029.
