Singapore’s latest 6-month Treasury bill (T-bill) auction on February 13, 2025, saw a significant drop in yields to 2.90% amid soaring demand. This marks the lowest yield since August 2022 and has left many investors questioning the future of fixed-income opportunities.
So, what caused this decline, and what should investors do next? Let’s dive into the details of the latest T-bill auction results.
Key Takeaways from the Latest 6-Month T-bill Auction
1. Record-High Demand for T-bills
Investor interest in Singapore T-bills has reached unprecedented levels. The total applications for the 6-month T-bill surged to S$23.3 billion, up from S$15.3 billion in the previous auction.
- Competitive bids soared to S$19.7 billion, surpassing the previous record of S$15.3 billion on January 16.
- Non-competitive bids also increased to S$3.6 billion from S$2.3 billion.
- Investors who bid below 2.90% received full allocations, while those who bid at exactly 2.90% received around 29% of their requested allocation.
2. Slight Increase in T-bill Issuance Size
The government responded to rising demand by increasing the total issuance of T-bills slightly:
- S$7.3 billion worth of T-bills were issued, compared to S$7.2 billion in the previous auction.
- However, the demand-to-supply ratio jumped to 3.19x, significantly higher than the 2.13x ratio in the last auction.
This sharp rise in demand relative to supply contributed to the lower cut-off yield.
3. Decline in Median and Average T-bill Yields
Another notable trend was the fall in median and average yields:
- Median yield: 2.78% (down from 2.97%).
- Average yield: 2.52% (down from 2.69%).
This suggests that many investors were willing to accept lower yields, possibly due to declining global bond yields and limited alternatives in the local fixed-income market.
What This Means for Investors
- Falling T-bill Yields Indicate Strong Demand and Limited High-Yield Options
- Despite lower yields, T-bills still offer better returns than Singapore’s best fixed deposit rates.
- However, at 2.90%, the latest cut-off yield is below the break-even yield for CPF OA applications, making it less attractive for CPF investments.
- Investors May Look Elsewhere for Higher Yields
- Analysts predict that retail investors could shift their funds to Singapore REITs (S-REITs) as T-bill yields continue to decline.
- Fixed deposits and corporate bonds may also become more appealing if their rates remain competitive.
- Upcoming T-bill Auction on February 27, 2025
- The next 6-month T-bill auction is scheduled for February 27, 2025.
- Investors should monitor interest rate trends and global bond market movements before placing bids.
Final Thoughts
While the latest T-bill yield decline may disappoint some investors, Singapore T-bills remain a low-risk, government-backed investment option. However, with rates dropping, it might be time to explore alternative investment opportunities such as S-REITs, corporate bonds, or fixed deposits.
For those still interested in T-bills, careful bidding strategies and a watchful eye on market trends will be essential for securing the best returns in the next auction.
Stay updated on Singapore’s latest investment trends and financial insights by following our blog!
