T-bill yield sinks to 3.65% p.a. What caused the sharp decline?



By Beansprout • 16 Mar 2023 • 0 min read

The yields submitted for competitive bids fell in the latest T-bill auction on 16 March.

T-bill auction 16 March 2023 allocation

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What happened?

The cut-off yield for the latest Singapore 6-month T-bill auction (BS23105W) on 16 March 2023 fell to 3.65% p.a.

This led to disappointment amongst some investors, some of whom were expecting the yield could potentially rise above 4.0% p.a.

Let’s take a look and find out what led to such a sharp decline in the bond yields in the latest Singapore 6-month T-bill auction. 


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Source: MAS

What we learnt from the latest T-bill auction

#1 – Total amount of applications for T-bills fell

The total amount of applications for the latest T-bill was at S$12.7 billion, falling from $13.0 billion in the previous auction.

It would appear that the end of the OCBC promotion offering 8-month fixed deposit at a rate of 3.88% p.a. for CPF funds did not lead to a significant increase in demand for T-bills.

The total amount of competitive bids fell to $11.9 billion from $12.3 billion in the previous auction. 

In fact, the amount of non-competitive bids increased to $837 million, reversing from the decline seen since February.

It seems that there are more investors who are keen to subscribe to the T-bill this time regardless of the yield offered on the T-bill.  

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#2 – Fall in yields submitted for competitive bids

With a decline in total amount of applications for T-bills, the fall in the yield in the T-bill auction on 16 March can be best explained by a fall in yields submitted for competitive bids. 

The median yield fell to 3.58% p.a. from 3.88 p.a. in the previous auction, representing a sharp decline of 0.30%.

The average yield fell to 3.41% p.a. from 3.58% previously, representing a more modest decline of 0.17%.

Comparing the median yield and cut-off yield, there were close to $1.9 billion of competitive bids that were made between the median yield of 3.58% p.a. and the cut-off yield of 3.65% p.a..

Earlier, we highlighted that investors are increasingly looking to park their money in safe assets and this has led to sharp decline in US bond yields following the collapse of Silicon Valley Bank.

It would seem that this flight to safety has also led to lower yields for the Singapore government bond too.

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What would Beansprout do?

The financial markets continue to be volatile in the wake of several bank failures in the US over the past week.

The lower yield on the latest Singapore 6-month T-bill auction likely reflects the shift in risk sentiment globally. 

If you were not able to get your allocation of T-bills through cash applications, we were able to find a few fixed deposit accounts that offer an interest rate of close to 4%. This is higher than cut-off yield on the latest T-bill auction.

For those who are looking for a no-frills deposit account as a liquid option to park your spare cash before the next auction, do check out our reviews of the UOB Stash Account and CIMB FastSaver Account. 

The next T-bill auction will be on 30 March 2023, and we’ll continue to track the financial markets globally to assess how bond yields might change till then. 

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