Singapore 6-month T-bill interest rate now at 3.32% per annum!

What happened?

It seems like Singaporeans have recently joined 4-hour queues to put their money into fixed deposit accounts.

However, the Beansprout community has a different preference on where to put their money. 

After the red-hot US Consumer Price Index (CPI) data caused the stock market to tank, we asked our Telegram community how they're reacting to the market selloff.

24% of respondents said that they'd load up on Singapore Savings Bonds or Singapore Treasury Bills.

Only 2% said they'd queue to put money in a fixed deposit account.

So many were cheering the allotment result of the latest Singapore 6-month Treasury-bill (T-bill).

Investors who subscribed to the Singapore 6-month T-bill in the 15 September auction will receive a yield of 3.32% per annum. 

Compared to the Singapore Savings Bonds (SSB) where investors were only allotted up to a maximum limit of S$13,500 in the latest auction, 100% of applicants who submitted non-competitive bids for the 6-month T-bill received full allocation! 

What we learnt from the Singapore 6-month T-bill allotment result

Demand for the Singapore treasury bill is growing

It's clear that the demand for the Singapore 6-month T-bill amongst Singapore investors is increasing. 

As we shared in our earlier article on “Time to look at SGS Bonds”, individual investors typically apply for the 6-month T-bill using non-competitive bids. 

The total amount non-competitive bids submitted increased further to S$554 million in the latest auction compared to S$447 million in the previous auction on 1 September 2022. 

For some context, that exceeds the recent S$300 million public offering of the Frasers Property retail green bond.

However, it is still far below the S$1.9 billion of subscriptions to the latest Singapore Savings Bond.

As we mentioned earlier, this might be one of the reasons for the lower demand for the most recent Singapore Savings Bonds in the last auction, as more Singaporeans find out more about the T-bill  and realise they can earn a decent interest rate without the constraint of the allotment limit for the SSB. 

The other trend to highlight is that the yield on the latest Singapore 6-month T-bill of 3.32% is significantly higher than the yield of 2.99% just two weeks ago. 

This likely reflects the sharp move up in interest rates after the US Consumer Price Index (CPI) rose more than expected in August. 

Most economists are now expecting the US Federal Reserve to raise interest rates by 1.0 percentage point (100 basis points) next week in the battle against higher inflation. 

As seen in the chart below, the market yield on the Singapore 6-month T-bill jumped following the inflation data was released earlier this week. 

What would Beansprout do? 

The Singapore 6-month T-bill is our preferred option to park our cash with the attractive interest rates compared to other options in the market. 

However, we would not put all our spare cash into the T-bill, as it might not be as liquid in the secondary market. 

If you're looking to retain some flexibility, then the Singapore Savings Bond (SSB) and other deposit accounts might also be useful options to consider too. 

Also, while the interest rate reached 3.32% per annum in the latest auction, it does not mean that the yield for the next auction will remain as high. 

A lot still depends on what the US Federal Reserve does and say over the next few weeks. 

If you are keen, the next auction for the Singapore 6-month T-bill auction will happen on 29 September 2022, which means that you’ll need to apply by 9pm on 28 September. 

Find out more about how to apply for the Singapore Treasury-bill or SGS Bond here. 

Join our Telegram group if you have any questions about the the Singapore Treasury-bill or SGS Bond!