Will the T-bill yield stay high in the auction on 9 May?

What happened?

I noticed that there were quite a number of questions about the Singapore T-bill in the Beansprout community in the past week. 

Some investors might be eyeing the upcoming 6-month Singapore T-bill (BS24109A) auction on 9^th May 2024. 

After all, the yield on the T-bill has remained high even 3.74% in the previous auction on 25 April, despite the fall in fixed deposit rates. 

In addition, we have seen quite a lot of volatility in interest rates in recent weeks after the latest Fed meeting.

In this post, I will be sharing if it might be worthwhile applying for the T-bill by looking at the latest indicators.

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Will the Singapore T-bill yield remain high in the upcoming auction?

#1 – US government bond yields have fallen in recent days

One of the things I noticed in that US government bond yields have fallen slightly in the past week.

The weaker than expected employment data in the US seems to have revived investors’ hopes that the Federal Reserve may not keep interest rates higher for longer once again.

The 10-year US government bond yield has fallen to 4.5% from 4.7% about a week ago.  

Likewise, the US 2-year government bond yield has fallen to 4.8% after breaching the 5.0% mark last week. 

#2 – Singapore government bond yields remain elevated 

The yield on Singapore government bonds has remained high despite the fall in US government bond yields in the past week. 

The closing yield on the 10-year Singapore government bond was at 3.38% as at 3 May 2024, stable from the yield of 3.41% on 25 April.

Likewise, the closing yield on the 6-month Singapore T-bill was at 3.74% as at 3 May, unchanged from the cut-off yield in the previous auction.

We can also take reference from the yield of the 3-month MAS bill to get an understanding of shorter-maturity Singapore government bonds.

The cut-off yield was at 3.91% in the auction on 30^th April, little changed from the auction on 23^rd April. 

#3 – Larger amount of T-bills issued

Another thing I noticed is that the amount of T-bills issued in the upcoming auction will increase further to S$6.8 billion from S$6.6 billion in the previous auction. 

This would mark the largest amount of 6-month T-bills issued in a auction. 

In the previous auction on 25^th April, we saw that demand for the 6-month Singapore T-bill unexpected declined from a record high.

If demand for the T-bill continues to decline, the larger amount of T-bills issued may help to support the cut-off yield in the T-bill.

What would Beansprout do?

The closing yield on the 6-month Singapore T-bill has remained elevated at 3.74% despite the slight decline in US government bond yields in recent days. 

In addition, the larger amount of T-bills issued in the upcoming auction may also help to support the cut-off yield. 

With the closing yield on the Singapore T-bill remaining significantly above the best 6-month fixed deposit rate of 3.35% p.a., I would consider the upcoming 6-month Singapore T-bill as a safe way to earn a higher return on our savings in the short term. 

To calculate how much more interest you can potentially earn by investing in the T-bill using your CPF OA savings, check out our CPF-T-bill calculator. 

If you are worried that the decline in US government bond yields may cause the cut-off yield to fall sharply, it might be worth considering putting in a competitive bid. 

When we submit a competitive bid, we will only invest in the T-bill if the yield is above a certain level.  To find out how to make a competitive T-bill bid, check out our guide here.

The 6-month Singapore auction will be held on Thursday, 9 May 2024. We would need to put in our cash applications for the T-bill by 9pm on 8 May (Wed).

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Applications for the T-bill using CPF-OA will close 1-2 business days before the auction date, and the dates differ across the three local banks.

• Applications for T-bills online using CPF OA via DBS close at 9pm on 8 May (Wed). Read our step-by-step guide to applying via DBS. 
• Application for T-bills online using CPF OA via OCBC close at 9pm on 8 May (Wed). Read our step-by-step guide to applying via OCBC
• Applications for T-bills online using CPF OA via UOB close at 9pm on 7 May (Tue) Read our step-by-step guide to applying via UOB. 

If you are new to investing in the T-bill, check out our comprehensive guide to Singapore T-bills to learn more.

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