[SINGAPORE] The cut-off yield for Singapore’s latest six-month Treasury bill (T-bill) dropped to 2.05 per cent, based on auction results released by the Monetary Authority of Singapore (MAS) on Thursday (Jun 5).
This was a decline from the 2.2 per cent cut-off yield offered in the previous six-month auction that closed on May 22.
It was the lowest level that yields have hit in the year to date and marked the sixth consecutive issuance since Mar 26 for which yields have declined.
Demand for the latest tranche fell as the auction received S$17.9 billion in applications for the S$7.6 billion on offer, representing a bid-to-cover ratio of 2.35.
This was down from the previous auction, which received S$18.1 billion in applications for the S$7.5 billion on offer, translating to a bid-to-cover ratio of 2.41.
The median yield for the latest auction stood at 1.99 per cent, lower than the 2.18 per cent median yield in the prior round. Average yield dropped to 1.9 per cent from 2.07 per cent previously.
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“The increased demand for Singapore dollar (SGD) fixed-income products is spilling over onto MAS bills, resulting in a sharp drop in cut-off yields despite the Fed keeping its policy rate on hold since the start of the year,” said Eugene Leow, DBS head of fixed-income research.
He expects the Fed to hold rates steady in June, but to signal readiness to cut them later in the year if US economic data shows signs of weakness.
Leow added that a rebalancing of portfolios could mean a sustained period of interest for SGD assets, which would keep short-term SGD rates low for some time, even if the Fed keeps rates on hold.
Meanwhile, OCBC’s head of foreign exchange and rates strategy Frances Cheung said the cut-off yield of 2.05 per cent was in line with expectations, given the decline in SGD interest rates since the last auction.
“SGD liquidity has remained flush while demand for high-rated papers such as SGS (Singapore Government Securities) is strong,” she added.
Cheung noted that T-bill cut-offs are influenced by factors such as the prevailing liquidity situation and US dollar interest rates, with “two-way risks” around current yield levels.
“While the US Fed is expected to keep rates on hold at (the) June meeting, our base case remains for a total of 75 basis points of cuts in H2 2025,” she noted.
In November last year, the government passed a parliamentary motion to issue an additional S$450 billion in government securities, raising its issuance limit to S$1.515 trillion, from S$1.065 trillion previously. The new limit is expected to be in force until 2029.
