Auction receives a total of S$13.5 billion in applications for the S$7.7 billion on offer, representing a bid-to-cover ratio of 1.75
[SINGAPORE] The cut-off yield on Singapore’s latest six-month Treasury bill (T-bill) rose to 1.44 per cent, based on auction results released by the Monetary Authority of Singapore on Thursday (Sep 25).
This was an increase from the 1.38 per cent offered in the previous six-month auction that closed on Sep 11.
This also comes after yields fell for 13 consecutive issuances since Mar 26.
The latest auction received a total of S$13.5 billion in applications for the S$7.7 billion on offer, representing a bid-to-cover ratio of 1.75.
In comparison, the previous auction received a total of S$15.7 billion in applications for the S$7.8 billion on offer, which worked out to 2.02 for the bid-to-cover ratio.
The median yield for the latest auction stood at 1.33 per cent, up from 1.31 per cent in the previous auction.
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The average yield fell to 1.23 per cent, from 1.27 per cent previously.
All non-competitive bids were allotted, amounting to S$903.5 million, while around 4 per cent of competitive applications at the cut-off yield were allotted.
DBS senior rates strategist Eugene Leow said that “a soft floor for T-bill cut-off appears to have been found”, with the latest auction showing a higher cut-off and median rate despite the recent quarter-point US Federal Reserve cut.
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Noting a softening demand via the bid-to-cover ratio, he said: “We think that current rates are below the hurdle rate for many retail investors, which might account for weak T-bill demand.”
“We suspect that downward pressures on T-bill rates would be limited going forward, even as we expect the Fed to cut by another 75 basis points in this cycle,” said Leow.
Meanwhile, Frances Cheung, head of foreign exchange and rates strategy at OCBC, said the cut-off was within their expected range of 1.4 to 1.44 per cent.
“The six-basis-point increase in the six-month T-bill yield matched the uptick in market interest rates, suggesting some yield premium needs to be maintained to attract demand,” she said.
Pointing out the lower bid-to-cover ratio, she added: “Investors’ interest has subsided somewhat after yields moved to lower levels.”
Singapore will issue up to another S$450 billion in government securities, with a parliamentary motion having been passed last 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.
