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

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. 

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.

#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.

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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