SINGAPORE’S latest one-year tranche of Treasury bills (T-bills) is offering a cut-off yield of 3.58 per cent, according to auction results released on Thursday (Apr 18).

Yields rose from the last offering of the one-year tranche in January 2023, which had a cut-off yield of 3.45 per cent.

Meanwhile, the latest six-month tranche of the bills, which closed on Apr 11, offered a cut-off yield of 3.75 per cent.

Applications worth S$10.1 billion were made for a total amount allotted of S$5.1 billion, which puts the bid-to-cover ratio at 1.97.

This is lower than the bid-to-cover ratio of 3.19 at the previous one-year T-bill auction in January, in which there were S$14.4 billion in applications for S$4.5 billion on offer.

OCBC head of wealth advisory Aaron Chwee pointed out that the higher cut-off yield was not surprising, as the strength of the US economy makes it challenging for the Federal Reserve to begin cutting rates.

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Singapore’s interest rates tend to move with global interest rate expectations, as the Monetary Authority of Singapore regulates inflation via the exchange rate.

“Our view is the Fed will cut rates twice in 2024, starting in the third quarter. The Fed is unlikely to make any changes in its November 2024 meeting, as it does not want to be perceived as influencing the outcome of the upcoming US elections,” Chwee said, adding that he expects Singapore T-bill cut-off yields to fall in the second half of this year.

Similarly, Eugene Leow, senior rates strategist at DBS, said that the rise in rates could be attributed to the pullback in Fed rate cut expectations since the start of this year.

“I would expect short-term SGD rates to be fairly stable the Fed is likely to stay on hold for a while more,” he said, adding that demand metrics appear mixed, with a lower bid-to-cover ratio in the latest auction.

Yield on the T-bills hit a 30-year high of 4.4 per cent in December 2022, but it has hovered mostly around the 3.7 to 3.8 per cent range since March 2023.

Demand for T-bills remains strong as they continue to yield higher returns amid the high interest rate environment.