Singapore T-Bill Yields Drop to 1.85%

Globally, expectations of monetary policy shifts are also playing a role. Speculation that the US Federal Reserve may resume cutting interest rates in the second half of 2025 has contributed to the lower cut-off yields. The Fed’s actions have a ripple effect on global markets, including Singapore, where investors adjust their portfolios based on anticipated changes in US borrowing costs. The median yield of bids submitted in the latest auction fell to 1.76% from 1.95%, and the average yield dropped to 1.64% from 1.88%, indicating that a substantial number of investors are willing to accept lower returns for the safety and liquidity that T-bills provide. This suggests a cautious outlook, with investors prioritizing capital preservation amid global uncertainties.

Despite the increased demand, the current application volume of S$16.1 billion remains below the peak of S$23.3 billion seen in February 2025, when yields were higher. This moderation in demand could reflect a recalibration of investor expectations as yields continue to decline. However, the fact that all non-competitive bids, totaling S$1.5 billion, were fully allotted, and approximately 41% of competitive bids at the cut-off yield were successful, indicates that T-bills remain a popular choice for both retail and institutional investors seeking low-risk investments.

The auction results provide further insight into investor behavior. The full allocation of non-competitive bids suggests that retail investors, who typically opt for this route to avoid specifying a yield, continue to view T-bills as a safe haven. Meanwhile, the partial allocation of competitive bids at the cut-off yield indicates a competitive environment where some investors are willing to accept lower returns to secure a portion of the issuance. This dynamic highlights the appeal of T-bills as a liquid, government-backed instrument, even as yields trend downward. However, for those seeking higher returns, the current yield environment may necessitate a shift toward alternative investments that offer better risk-adjusted returns.

The broader implications for fixed income investors are significant. As T-bill yields fall, the opportunity cost of holding these instruments increases, particularly when compared to other low-risk options. This could lead to a reallocation of capital within portfolios, with investors exploring avenues that balance safety with higher yields. The challenge lies in maintaining a conservative approach while adapting to a market where traditional safe havens are offering diminished returns.

Another popular option is money market funds, which invest in short-term debt securities and can offer higher returns than savings accounts, with the added benefit of daily liquidity. These funds are particularly appealing for investors seeking flexibility without locking in their capital for extended periods. For those comfortable with longer tenures, Singapore Savings Bonds (SSB) present a compelling alternative. The latest SSB issuance offers a 10-year average return of 2.29%, which is significantly higher than the current T-bill yield. SSBs also feature a step-up interest rate structure, providing a hedge against rising inflation over time. Additionally, some financial institutions are offering promotional rates or bonuses on deposit products, which could provide temporary boosts to returns, though careful evaluation of terms is essential.

For investors with a higher risk tolerance, allocating a portion of their portfolio to equities could be beneficial, particularly in a low-interest-rate environment where companies may have easier access to capital, potentially driving stock prices higher. Sectors such as technology or consumer staples, which have shown resilience in Singapore’s market, may offer opportunities for growth. However, equities come with increased volatility, and investors should conduct thorough research or consult financial advisors to align their choices with their risk profiles. Diversifying across asset classes, including fixed income alternatives and equities, can help mitigate risks while capitalizing on opportunities in the current market.

The government’s decision to raise the issuance limit for government securities to S$1.515 trillion, up from S$1.065 trillion, signals a strategic approach to fiscal policy. This increase, expected to last until 2029, could be aimed at financing infrastructure projects, social programs, or other expenditures to support economic growth. In theory, an increased supply of government debt could exert upward pressure on yields, but the current market dynamics—characterized by strong demand and low inflation expectations—have kept yields suppressed. This suggests a high level of confidence in Singapore’s economic stability and the safety of its government securities, positioning the city-state as a safe haven amid global uncertainties.

On the global stage, the anticipation of US Federal Reserve rate cuts in 2025 is a critical factor influencing Singapore’s T-bill yields. As the world’s largest economy, the US sets the tone for global interest rates, and expectations of lower rates can lead to a repricing of risk across markets. If the Fed does cut rates, it could further depress yields on Singapore’s T-bills, as investors seek higher returns elsewhere or adjust their portfolios in response to cheaper borrowing costs worldwide. This interconnectedness underscores the importance of monitoring global economic developments, as they have direct implications for Singapore’s financial markets and investor strategies.

​Looking ahead, investors should remain vigilant about both local and global economic developments. The US Federal Reserve’s monetary policy decisions, coupled with Singapore’s own economic indicators, will play a critical role in shaping future yield trends. Diversification and a long-term perspective are essential for navigating this evolving environment. By staying informed and adaptable, investors can position themselves to maximize returns while managing risks in a low-yield world. The current T-bill yield trend is a reminder of the dynamic nature of financial markets and the need for proactive strategies to achieve financial goals.