THE cut-off yield on Singapore’s latest six-month Treasury bill (T-bill) fell to 2.97 per cent in the first auction after the US Federal Reserve announced it was cutting rates in September.
This is the first time yields fell below the 3 per cent mark since September 2022. Yields stayed elevated in the past two years as the Fed kept interest rates high to combat post-pandemic inflation.
“Much of this is probably due to increased awareness that the Fed has begun cutting rates,” said Eugene Leow, senior rates strategist at DBS.
“With the Fed delivering a 50 basis point (bp) cut at a go, the message is clear that there will be more to come. This also implies that T-bill rates should continue falling in the coming months,” he said.
Thursday’s (Sep 26) auction results indicated that cut-off yield fell to 2.97 per cent, from 3.1 per cent in the Sep 12 auction.
The latest auction received S$13.9 billion in applications for the S$6.8 billion on offer, representing a bid-to-cover ratio of 2.05.
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Demand rose slightly from the previous auction, which had S$13.4 billion in applications for the S$6.9 billion on offer.
Non-competitive bids totalled S$1.5 billion and were fully allotted. About 95 per cent of competitive applications at the cut-off yield were allotted.
Leow said there was likely demand to lock in yields while the levels are still decent. But demand could taper off as yields fall and investors start to look for alternatives, he added.
Cheong Wei Ming, fixed income portfolio manager at Eastspring Investments, noted that the Federal Open Market Committee’s dot plot has projected another 50 bps of easing for 2024, and 100 bps next year, to reach a median
