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T-bill yield rebounds to 3.93%: Are fixed deposits driving lower demand?

16 Feb 2023

The total amount of applications fell to S$11 billion in the latest T-bill auction on 16 February.

What happened?

After falling for consecutive weeks, the cut-off yield for the latest Singapore T-bill auction (BS23103T) on 16 February 2023 rose to 3.93% p.a.

There was a decline in the total amount of applications for the T-bill auction, as it would seem that some investors decided to switch to putting their money into fixed deposit, after OCBC started offering 3.88% p.a. for a 8-month fixed deposit using CPF OA funds. 

Let’s take a look and find out if this had a significant impact on the latest T-bill auction

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Source: MAS

 

What we learnt from the latest T-bill auction

#1 – Lower applications for T-bill 

The total amount of applications for the latest T-bill was at $11.0 billion, falling from S$12.9 billion in the previous auction.

This would be the lowest level of applications since 8 December 2022, when the total amount of applications was at S$9.3 billion. 

It would appear that OCBC’s latest offering of a 8-month fixed deposit at 3.88% for CPF-OA funds has led to a shift in demand away from T-bills.

It is also interesting to note that applications fell across both competitive and non-competitive bids.

The amount of non-competitive bids fell further to S$737 million from S$772 million in the last auction. It’s now significantly lower compared to the peak of S$3.6 billion in November. 

The amount of competitive bids also fell to S$10.3 billion from S$12.1 billion in the previous auction.

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#2 – No significant change in bid yields 

While there was a fall in the total amount of T-bill applications, there were no significant changes to the bid yields made in the latest auction.

The median yield fell slightly to 3.70% p.a. from 3.77% in the previous auction, continuing a declining trend we have seen recently. 

For those who are not familiar with the median yield, it is the middle of all the competitive bids that were allotted the T-bill.

The average yield was at 3.26% p.a., almost similar to the average yield of 3.27% in the previous auction. 

This would mean that there were less bids submitted at very low yields compared to auction on 18 January.

Comparing the median yield and cut-off yield, there were close to S$2.1 billion of competitive bids that were made between the median yield of 3.70% and the cut-off yield of 3.93%.

That's quite close to some of the better fixed deposit interest rates available in the market.

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What would Beansprout do?

It’s good to see more options available to investors to allow our money to work harder. 

For CPF investments, we can consider the 6-month T-bill and OCBC 8-month fixed deposit, both of which offer a yield of close to 3.9% p.a.

If you’re interested in the OCBC 8-month fixed deposit but find it a hassle to wait at the branch, we share how you can avoid the queue with this trick.

If you’re interested in the next T-bill auction that is coming up on 2 March, we share how you can now apply for T-bills using CPF-OA via DBS internet banking.  

If you were not able to get your allocation of T-bills through cash applications, the good news is that we were still able to find a few fixed deposit accounts that offer an interest rate of close to 4% over 6 months, 8 months and 12 months. 

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