T-bill yield falls to 2.99%. Why the decline?

What happened?

The results for the latest 6-month Singapore T-bill auction are out.

The cut off yield for the 6-month Singapore T-bill (BS25101F) auction on 16 January was at 2.99%, representing a decline from the cut-off yield of 3.05% in the previous T-bill auction on 2 January. 

I saw a fair bit of discussion in the Beansprout Telegram community about the T-bill auction result after it came out. 

In this post, I will dive deeper into the most recent 6-month Singapore T-bill allotment result to find out what led to the fall in the yield. 

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

#1 - Demand for the Singapore T-bill surged

The total applications for the 6-month Singapore T-bill amounted to S$18.4 billion, an increase from S$13.7 billion in the previous auction.

This represents a record high amount of T-bill applications, surpassing the previous high of S$18 billion in the auction on 1 August 2024.

The amount of competitive bids increased to S$15.2 billion from S$11.5 billion in the previous auction. 

If you placed a competitive bid below 2.99%, you would receive 100% of your requested T-bill allocation.

If you bid at exactly 2.99%, the allocation would be around 41%. 

Meanwhile, non-competitive bids increased to about S$3.2 billion from S$2.2 billion in the previous auction.

Since the amount of non-competitive bids exceeded the allocation limit, eligible non-competitive bids received approximately 92% allocation. 

#2 - Issuance size slightly larger than the previous T-bill auction

The amount of T-bills issued increased slightly to S$7.2 billion from S$6.9 billion in the previous auction. 

With total applications increasing from S$13.7 billion to S$18.4 billion, the ratio of applications to T-bills issued increased significantly from 1.99x to 2.55x 

The high amount of T-bill applications compared to the issuance size may have contributed to the lower T-bill cut-off yield. 

#3 - Median and average yield of T-bill bids fell

The median yield of bids submitted declined to 2.88% from 2.90% in the previous auction.

The median yield fell despite the bounce in the US government bond yield and stable Singapore government bond yields over the past two weeks.

Similarly, the average yield of bids submitted declined from 2.58% to 2.52%. 

This may mean that there were some bids that were made at fairly low levels, which pulled down the average yield of bids submitted. 

Given the median yield and the cut-off yield, this suggests that a substantial number of bids were placed in the 2.88% to 2.99% range, slightly above the breakeven yield for CPF applications. 

What would Beansprout do? 

The fall in the T-bill yield in the latest auction appears to be driven by a surge in T-bill applications. 

This has capped the T-bill yield, despite a bounce in US government bond yields in recent weeks. 

Despite the decline in the T-bill yield, the cut-off yield of 2.99% in the latest auction would be above the best fixed deposit rates in Singapore.

It would also be above the break-even yield for CPF OA applications. 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.

To find out how you can earn a yield of above 2.99%, you can check out the best places to park your savings here.

If you are interested in applying for the T-bill, there will be an upcoming 1-year T-bill auction on 23 January, and an upcoming 6-month T-bill auction on 28 January. 

You can set a reminder by signing up for our free email alert below.

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