SINGAPORE - Retail investor demand for Treasury bills (T-bills) has grown in Singapore as the interest rates on these short-term government securities rose over the past two years.
Around 46 per cent of each T-bill issuance was allotted to retail investors in 2024. That is up from 2022, when retail investors were given about 13 per cent of each issue, Deputy Prime Minister Lawrence Wong said on Feb 27 in a written reply to a parliamentary question from Non-Constituency MP Leong Mun Wai.
The six-month T-bill issuance size has come in at around $6 billion in 2024, which means more than $2.76 billion of it would have been allotted to retail investors each time.
In contrast, the amount of six-month T-bills on offer was around $4 billion in 2022. Of that, retail investors would have got about $520 million worth of T-bills.
DPM Wong said investors bought into T-bills as the yields on these government securities rose over the past two years, tracking the gains in comparable instruments such as US Treasuries.
The yields on Singapore T-bills are determined via competitive auctions in a market that comprises individuals and institutions locally and overseas. They therefore reflect the general level and direction of interest rates in global markets, added DPM Wong, who is also Finance Minister.
US Treasuries have been on an uptrend since the United States Federal Reserve started raising rates in March 2022, as it tries to bring down inflation.
US yields broke past 5 per cent in 2023, and remain around these levels.
T-bills are issued by the Monetary Authority of Singapore and have maturities of six months or a year – the six-month T-bills are offered every two weeks while one-year T-bills are issued every three months.
Interest rates on the six-month T-bill went above 1 per cent in March 2022 and continued climbing to hit a 30-year high of 4.4 per cent on Dec 8, 2022.
The yields have come off slightly since then as investors weighed expectations of US interest rates cuts. The latest auction on Feb 15 gave investors a return of 3.66 per cent.
As for the one-year T-bills, interest rates hit a 30-year high of 3.87 per cent on Jan 26, 2023, before coming off slightly, with the latest auction on Jan 25 yielding a return of 3.45 per cent.
DPM Wong, in his reply, also said fixed deposit rates have increased over the past two years, alongside the higher demand for T-bills.
Faced with competition for funds, the banks have moved up fixed deposit rates to attract depositors.
However, these rates are also determined by the funding needs of banks and deposit growth relative to loan demand, he said.
Published information from the major retail banks showed that depositors can earn interest rates of up to 3 per cent on six-month fixed deposits and up to 3.5 per cent on 12-month fixed deposits.
