A Surprise Drop in Yields!

In an unexpected turn, the cut-off yield for Singapore's latest six-month Treasury bill (T-bill) has retreated to 2.5%. This significant decline was revealed in auction results published by the Monetary Authority of Singapore last Thursday.

This latest figure is down from the previous auction’s cut-off yield of 2.73%, held on March 26, indicating a shift in the market.

Strong Investor Interest!

Investor demand surged, with a striking S$17.2 billion in bids for the S$7.4 billion available. This equates to a robust bid-to-cover ratio of 2.32, compared to 2.14 in the last auction.

Interestingly, the median yield for the current auction was recorded at 2.4%, down from 2.6% previously, and the average yield fell even further to 2.1%, a drop from 2.54%.

Competitive Bids and Market Insights!

All non-competitive bids were accepted this time, amounting to S$1.6 billion, up from S$1.4 billion in the last auction. However, only about 9% of competitive bids at the cut-off yield were allotted, though this is an improvement from just 3% in the earlier auction.

OCBC's head of foreign exchange and rates strategy, Frances Cheung, noted that the yields were 'mildly below expectations', pointing towards a flush liquidity condition in the domestic market.

Economic Forecasts and Future Issuances!

As the year progresses, market expectations for US Federal Reserve interest rate cuts have climbed to 114 basis points. Yet, experts from Eastspring Investments caution that more than four rate cuts this year appear unlikely without clear signs of a recession in the US.

Amidst these fluctuations, Singapore plans to issue up to an additional S$450 billion in government securities, following a parliamentary motion to increase the issuance limit to S$1.515 trillion, effective until 2029.

What’s Next for Investors?

As yield rates continue to shift, investors are keenly monitoring the landscape. The current rates still exceed longer-term Singapore dollar swap rates, attracting attention and prompting cautious optimism.

Stay tuned as we keep you updated on how these financial trends unfold and impact your investments!