Singapore’s six-month Treasury bill (T-bill) yield has risen slightly to 3.02%, as revealed in the December 19 auction results from the Monetary Authority of Singapore. This is up from the 3% cut-off yield in the previous auction held on December 5, reflecting ongoing shifts in investor sentiment amid global economic uncertainties.
This article delves into the key highlights of the latest auction, trends in demand, and what it means for investors seeking stable returns in today’s market.
Key Takeaways from the December 19 T-Bill Auction
1. Cut-Off Yield Rises to 3.02%
- The cut-off yield for the six-month T-bill increased from 3.0% to 3.02%, aligning with expectations.
- Frances Cheung, head of FX and rates strategy at OCBC, commented that the slight rise reflects market adjustments to growth, inflation, and fiscal policy uncertainties.
2. Declining Demand Yet Sustained Interest
- Total Applications: Dropped to S$15.8 billion from S$17.4 billion in the previous auction.
- Issuance Size: Slightly lower at S$6.8 billion, down from S$7.1 billion.
- The bid-to-cover ratio (applications to T-bills issued) declined slightly to 2.33x from 2.45x, still reflecting solid demand for the securities.
3. Competitive and Non-Competitive Bid Outcomes
- Competitive Bids: Applicants bidding below 3.02% received full allocation, while those at the cut-off yield received approximately 10% allocation.
- Non-Competitive Bids: Totaled S$2.3 billion and were fully allotted.
4. Yield Trends Indicate Mixed Sentiment
- Median Yield: Increased to 2.95%, up from 2.90%.
- Average Yield: Decreased to 2.66% from 2.73%, suggesting some lower-level bids impacting overall averages.
What’s Driving the Yield Movements?
Global factors are influencing Singapore’s T-bill yields:
- US Federal Reserve Policies: The Fed’s recent quarter-point rate cut, reducing the range to 4.25%-4.5%, impacts investor expectations.
- Bond Market Dynamics: Fluctuations in US and Singapore government bond yields over the past two weeks contributed to the median yield rise.
Investor Implications
CPF OA Funds for T-Bill Investments
The cut-off yield of 3.02% aligns closely with CPF Ordinary Account (OA) breakeven rates, making T-bills an attractive option for CPF funds. Use tools like a CPF T-bill calculator to assess potential earnings.
Alternative Yield Options
While T-bill yields remain competitive, investors may explore other avenues such as:
- Fixed deposits offering similar or higher interest rates.
- Bond funds or other securities that cater to risk-adjusted return preferences.
Looking Ahead: Next Auction in January 2024
The next six-month T-bill auction is scheduled for January 2, 2024. Investors can stay informed by setting reminders and exploring market trends to maximize their returns.
Conclusion
The slight rebound in Singapore’s six-month T-bill yield underscores market dynamics and evolving investor preferences. For those seeking stable and secure returns, T-bills remain a viable option, especially for CPF OA funds.
However, with the competitive landscape of fixed-income investments, it’s essential to explore diversified strategies to maximize returns.
