SINGAPORE: Yields on Singapore’s six-month Treasury bill (T-bill) fell to a more than two-year low on Thursday (Sep 26), with the latest auction reporting a cut-off yield of 2.97 per cent per annum.
This is the lowest return on a six-month T-bill since August 2022 – a development that is not unexpected to market watchers after the United States Federal Reserve last week announced its first rate cut in four years.
T-bills are short-term debt securities issued and backed by the Singapore government, with maturities of one year or less.
They are sensitive to interest rate changes. When the Fed embarked on a rate-hike race to curb inflation in 2022, yields on the six-month T-bill went on a meteoric rise to hit a multi-decade high of 4.4 per cent on Dec 8 that year. Returns have mostly stayed above 3.5 per cent since then.
But when the prospect of US rate cuts became imminent in recent months, yields began to fall rapidly.
They first fell below 3.5 per cent on Aug 1, with yields of 3.4 per cent. Subsequent six-month T-bill auctions saw steady declines in returns – from 3.34 per cent on Aug 15 to 3.13 per cent on Aug 29 and 3.1 per cent on Sep 12.
“T-bill rates (have taken) into account the likelihood of Fed easing in the coming months and have therefore drifted lower even ahead of the first cut,” said DBS’ senior rates strategist Eugene Leow.
