Singapore's 6-month treasury bill hits 4.19% yield, highest since 1988

SINGAPORE: Yields on Singapore's six-month Treasury bill (T-bill) hit a multi-decade high on Thursday (Oct 27), with the latest auction reporting a cut-off yield of 4.19 per cent per annum.

This marked the highest yield on a six-month T-bill since September 1988, when the return rate peaked at 4.73 per cent.

T-bills are short-term debt securities issued and backed by the Singapore Government, with maturities of one year or less.

Like the Singapore Savings Bonds – another type of Singapore Government Securities – its yields have been on an uptrend this year, as global central banks go on a rate-hike race to curb inflation.

The latest cut-off yield is up from the 3.77 per cent reported for the six-month T-bill issued last week, and up from 0.55 per cent at the start of the year.

Amid rising returns, demand for T-bills has also been heating up.

The latest auction received applications amounting to S$10.9 billion for a total allotment of S$4.6 billion.

The previous issue was also over-subscribed, with S$10.2 billion worth of bids for a total allotment of S$4.5 billion.

All non-competitive bids of S$1.8 billion were allotted in the latest auction, while only 14 per cent of competitive bids were allotted at the cut-off yield, according to results released on the website of the Monetary Authority of Singapore.

T-bills are issued via an auction process where competitive and non-competitive bids are placed. 

A competitive bid allows applicants to specify the yield they are willing to accept, while a non-competitive bid is one where investors only specify the amount they want to invest but not the yield.

At each auction, up to 40 per cent of the total issuance size will be allotted to non-competitive bids. If the amount of non-competitive bids exceeds this limit, the allotment will be made on a pro-rated basis. 

Those with successful bids will be allotted the T-bill at the cut-off yield, or the highest accepted yield among successful competitive bids submitted at the auction.

Unlike Singapore Savings Bonds where interest is paid out twice a year, T-bills are issued at a discount and investors will receive the full face value at maturity.

For example, if you applied successfully for a six-month T-bill, you will first receive the full interest – calculated based on the cut-off yield – and get your full principal back when the T-bill matures six months later.

The latest T-bill is set to be issued on Nov 1 this year and will mature on May 2.

SINGAPORE SAVINGS BONDS

Demand also remained strong for Singapore Savings Bonds.

The latest tranche, which has a record-high average return of 3.21 per cent over 10 years, received applications worth S$2.2 billion, doubling from the previous issue.

With only S$900 million worth of savings bonds to be allotted, the quantity ceiling format – applied when applications exceed the issuance size – kicked in, with those who applied for S$10,000 or lower being fully allotted.

Approximately 29.15 per cent of those who applied for S$10,500 or higher were allotted either S$10,000 or S$10,500, with the selection being done randomly, according to results released on MAS’ website.

This tranche of savings bonds will be issued on Nov 1 this year and mature on Nov 1, 2032.