We have written on shifting trends in SGD liquidity and how the funding mix for banks has become a lot more expensive in recent months (see here and here). Another shift is likely in the coming weeks as demand for T bills boils over. At the last 6M auction, there were more than 92000 bids and a bid-to-cover ratio of 3.17. With this much demand, the cut-off rate fell to 4%, down from 4.19% in the preceding auction. The crux of the auction results is that a chunk of the uncompetitive bids was under-allocated. This might prompt a shift towards competitive bids and could well pull down T bill cut-offs in the subsequent auctions. To be sure, other factors including auction size and fixed deposit offerings also matter, but it would seem that retail demand will continue to be high when short-rates are in the high 3.XX levels. 
If retail money increasingly shifts into fixed deposits or T bills, the funding mix of banks will become more expensive. We noted that that MAS bills, which have a smaller investor base (and not available to), have been seeing very high cut-offs. This segment of the market appears to be running somewhat short of liquidity (either unwilling or unable to invest in the bills at current rates) with the recent 4.6% cut-off for the 3M MAS bill. The differing trajectories display the redistribution of liquidity within the system, in our opinion. We would be closely watching the net withdrawal rate from MAS bills to ascertain whether the two rates tear further.
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