Latest T-bill offers 4.2% yield per annum

The latest Singapore 6-month T-bill now offers a 4.2% yield per annum for investors, according to the first auction released on 5 January.

The current yield is lower than the 4.28% cut-off yield reported for the last auction on 21 December.

T-bills are short-term debt securities that are issued and backed by the government. It matures after one year or less. Just like Singapore Savings Bonds, another type of Singapore Government Securities, the rates of T-bills have increased last year as global central banks went and continued to hike their rates amid inflation.

The yields on the six-month T-bills started in 2022 at 0.55%. By the end of October, it rose to breach 4%.

On 8 December, returns were at a multi-decade high of 4.4%. This is the highest it has been since September 1988 when the rate settled at 4.73%.

In the future, yields are expected to moderate given expectations for the United States Federal Reserve to go for smaller and slower interest rate hikes before pausing later in 2023.

“I think this year or maybe going into next year, the 4 percent T-bills will look like a transitory phenomenon (once) rates have peaked,” stated DBS Bank’s senior investment strategist Daryl Ho. He also added that investors may consider shifting their attention to other assets that have similar returns over a longer period.

That said, the demand for T-bills remains solid. The latest auction received a total of S$12 billion in applications for a total allotment of S$4.7 billion.

T-bills are issued via an auction process where investors place competitive and non-competitive bids. All non-competitive bids of S$1.4 billion were allocated in the latest auction. Meanwhile, 27% of competitive bids were allotted at the cut-off yield.

The latest T-bill is set to be issued on 10 January. It will mature on 11 July.

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