T-bill yield rebounds to 3.73%. What’s driving the bounce?

What happened?

After consecutive weeks of decline in the yield on the 6-month Singapore T-bill, the cut-off yield on the latest 6-month T-bill auction finally saw a rebound.

The cut-off yield on the latest 6-month T-bill auction (BS23118S) on 14 September rose slightly compared to the previous auction to 3.73%.

Let us dive deeper to understand what is driving the higher yield in the latest T-bill auction.  

What you need to know about the latest Singapore T-bill auction on 14 September 

#1 – Demand for T-bills stayed the same compared to the previous auction.

The total amount of applications for the latest T-bill was at S$11.2 billion, unchanged from the previous auction on 31st August. 

The amount of non-competitive bids remained the same at S$1.6 billion. As this is below the allocation limit for non-competitive bids, all eligible non-competitive bids received full allocation of the T-bill.

The amount of competitive bids also remained the same at S$9.6 billion.

Overall, it appears that the lower yields in recent T-bill auctions have not dampened investor demand. 

#2 – Median and average yields of bids submitted rose 

The median and average yield of bids submitted for the 6-month T-bill was higher compared to the previous auction, reflecting the increase in short term US bond yields in recent weeks. 

The median yield of bids submitted rose to 3.58% from 3.57% in the previous auction.

The average yield of bids submitted rose to 3.05% from 2.95% in the previous auction.

Based on the median yield and cut-off yield, it seems like there was a significant amount of bids that were made in the range of 3.58% and 3.73%. 

What would Beansprout do?

It appears that the higher cut-off yield of 3.73% in the latest auction is due to slightly higher bids submitted by applicants compared to the previous auction. This is seen in the increase in median and average yields too.

Interestingly, this move higher in the cut-off yield is in line with rise in best 12-month fixed deposit rate this month. Investors seem to have taken reference to the best 12-month fixed deposit rate of 3.58% in submitting their bids, which coincides with the median yield in the auction. 

However, as all investors who applied for the T-bill and were successfully allocated will receive the cut-off yield of 3.73%, the T-bill still offers a better return compared to fixed deposits for now. 

If you managed to subscribe to the 6-month T-bill using CPF OA funds, find out how much more interest you can potentially earn compared to the OA interest rate using our CPF T-bill calculator.

For those who did not get your intended allotment of the 6-month T-bill, you can consider alternatives to park your savings before the next 6-month T-bill auction on 28 September 2023.

Recently, more investors have been looking at cash management accounts to earn a potentially higher yield.

Alternatively, we can consider a high yield savings account that is liquid. The CIMB Fast Saver account and the Maybank iSAVvy account are both offering a promotional interest rate of 3.5% per annum for new customers or fresh funds by existing customers currently.

You can find our guide to the best savings accounts with the highest interest rate here.

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