SINGAPORE: The latest six-month Treasury bill (T-bill) auction in Singapore saw a rise in the cut-off yield to 3.04%, according to figures from the Monetary Authority of Singapore (MAS) released on Thursday, Nov 7. This yield was up from the 2.99% recorded in the previous auction on Oct 24, as reported by The Business Times.
Yields rose across the board, coinciding with Donald Trump’s win in the US presidential election on Wednesday.
Jason Kuan, director of investment research and advisory at CIMB, observed that the US 10-year Treasury yields had “climbed quite significantly” following the election. He noted that while the Federal Reserve is likely to lower interest rates by 25 basis points at its next meeting, there is now greater uncertainty around how it will reduce rates next year.
He noted that this comes as markets await Mr Trump’s fiscal policies set to roll out when he takes office in 2025.
Blerina Uruci, chief US economist at T Rowe Price, believes that inflation might take longer to settle around the Fed’s target of 2%, partly due to higher tariffs and a more relaxed fiscal approach anticipated under the Republican administration.
According to Ms Uruci, “(The) Fed would deliver fewer cuts in 2025 and the long end of the treasury curve should respond with higher-term premia (fiscal plus inflation risks more elevated).”
She added that the Fed might adopt a more cautious approach to interest rate policy if tighter financial conditions challenge the full employment mandate.
Demand for Singapore’s six-month T-bills saw a slight drop in the latest auction, with applications totalling S$12.3 billion for S$6.8 billion on offer, resulting in a bid-to-cover ratio of 1.82. This is down from the previous auction, which recorded a bid-to-cover ratio of 1.99 with S$13.5 billion in applications for the same amount on offer.
The median yield for the recent auction edged up to 2.95% from 2.93% in the prior auction, while the average yield dropped from 2.84% to 2.72%. Non-competitive bids, which allow investors to receive T-bills without specifying a yield, amounted to S$1.6 billion and were fully alloted. Around 2% of competitive bids at the cut-off yield were also alloted.
In December 2022, T-bill yields reached a 30-year high of 4.4% and remained elevated during the past two years as the Federal Reserve kept interest rates high to fight inflation in the aftermath of the pandemic.
However, yields began to fall when the Fed started reducing rates in September, beginning with a half a percentage point cut. /TISG
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