SINGAPORE - The auction for Singapore’s first one-year Treasury bill (T-bill) this year closed on Thursday with a cut-off yield of 3.87 per cent.
This was up from a yield of 3.72 per cent at the previous auction on Oct 13, which had a subscription rate of 2.3.
Thursday’s allotment of $3.6 billion had a subscription rate of 2.9.
Non-competitive bids totalled $643.9 million and were fully allotted.
In a non-competitive bid, an investor specifies only the amount he wants to invest, but not the yield. He will then be allocated T-bills at the cut-off yield.
Those who make non-competitive bids are usually allocated first, up to 40 per cent of the total issuance amount. If the amount of non-competitive bids exceeds 40 per cent, T-bills will be allocated on a pro-rated basis.
About 75 per cent of competitive applications at the cut-off yield were allotted. Those who specified a lower yield were fully allotted what they applied, and those who specified a higher yield did not get any allotment.
The total value of applications in this auction was $10.5 billion, up from $8.6 billion in the last one-year T-bill auction.
T-bills are issued at a discount, and investors get back the full face value at maturity. The bills can be purchased with cash, Supplementary Retirement Scheme funds or Central Provident Fund monies.
One-year T-bills are less subject to reinvestment risk compared with six-month bills, where funds need to be redeployed earlier, said Mr Eugene Leow, DBS Bank’s senior rates strategist. These worries about reinvestment might be driving demand for one-year T-bills, he added.
The January allotment for Singapore Savings Bonds (SSBs) also closed on Thursday.
While T-bills have a shorter tenor of six months to one year, SSBs have a longer tenor of 10 years, according to the Monetary Authority of Singapore.
SSBs can be redeemed in any month, and the investor will get his principal back with accrued interest by the second business day of the next month. T-bills can be traded in the secondary market, but selling before maturity means that prices may be above or below what was originally paid.
T-bills have a minimum investment amount of $1,000, while SSBs have a lower minimum investment of $500.
