T-bill yield rebounds to 3.66%. What’s driving the bounce?

What happened?

Many Singapore T-bill investors have some reason to cheer this Lunar New Year.

The cut-off yield for the latest 6-month Singapore T-bill (BS24103H) rose to 3.66% from 3.54% in the previous auction.

This marks the first increase after declines in consecutive T-bill auctions.

The latest 6-month Singapore T-bill also offers a higher cut-off yield than the recent closing yield on the T-bill. 

Let us find out what is driving the bounce in the yield on the 6-month Singapore T-bill.

What we learnt from the latest 6-month Singapore T-bill auction

#1 – Decline in demand for Singapore T-bill

The total amount of applications for the 6-month Singapore T-bill fell to S$13.5 billion from S$14.6 billion in the previous auction.

This is likely driven by the significantly lower yield in the previous auction, which may have deterred some investors from applying for the T-bill. 

Despite the fall, the amount of T-bill applications remains elevated and would be similar to levels we saw in the auction on 18 January.

The amount of competitive bids fell to S$11.5 billion from S$12.4 billion in the previous auction.

The amount of non-competitive bids fell further to S$2.0 billion from S$2.2 billion in the previous auction. 

As the amount of non-competitive bids was within the allocation limit, eligible non-competitive bids were able to receive full allocation. 

Once again, we have seen a greater preference for competitive bids in the T-bill auction. 

This may be driven by the recent 1-year T-bill auction and 6-month T-bill auction, where some investors may have realised the risk of ending up with a lower-than-expected yield with a non-competitive bid. 

With a competitive bid, we will only invest in the T-bill if the yield is above a certain level.

#2 – Median and average yield of bids submitted rose

There was also an increase in the average and median yield of bids submitted, consistent with the rise in bond yields in recent weeks.

The median yield of bids submitted rose to 3.48% from 3.21% in the previous auction.

The average yield of bids submitted rose to 3.00% from 2.63% in the previous auction.

However, the median and average yield of bids submitted remain below the auction on 18 January, which had a cut-off yield of 3.70%.

#3 – Larger amount of T-bills issued helped to support yield  

Earlier, we shared that the amount of T-bills issued in the latest auction has increased further to S$6.6 billion.

This represents the highest amount of 6-month T-bills put up for auction over the past year. 

Based on our observations from previous auctions, a larger amount of T-bills issued may help to support the cut-off yield in the auction. 

What would Beansprout do?

T-bill investors should be relieved that the cut-off yield has rebounded to 3.66% in the latest auction.

This appears to be driven by a moderation in demand, higher yield for bids submitted, as well as larger amount of T-bills issued. 

With the recent bounce, the cut-off yield on the latest 6-month Singapore T-bill is above the best 6-month fixed deposit rate of 3.50% once again.

This is especially so with banks cutting the fixed deposit rates over the past month.

Hence, we consider the T-bill to be a safe way to earn a higher return on our savings in the short term. 

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 T-bill, you can consider alternatives to park your savings before the next 6-month T-bill auction on 29 February 2024.

For example, cash management accounts allow you to earn a potentially higher return on your cash in a relatively safe way.  

Otherwise, you can consider high-yield savings accounts that may allow you to earn a higher interest rate on your savings. 

StashAway Simple Guaranteed also offers a guaranteed rate of 3.8% p.a. for a 3-month tenor. Also, get free investing for up to 6 months when you invest at least S$1,888 with StashAway. 

Join the Beansprout Telegram group and Facebook group for the latest insights on Singapore stocks, REITs, bonds and ETFs.