T-bill yield falls to lowest level since March. What's driving the decline?

What happened?

The cut-off yield on the latest 6-month T-bill auction (BS23116F) on 17 August 2023 has fallen further to 3.73%.

This represents a slight decline from the cut-off yield of 3.75% in the previous auction on 3 August. It also marks the lowest cut-off yield for the 6-month T-bill since March this year, when it was at 3.65%.

Let us find out what might be some reasons driving the lower yield on the 6-month T-bill. 

What we learnt from the latest T-bill auction

#1 – Demand for T-bills fell compared to the previous auction

The total amount of applications for the latest T-bill was at S$11.8 billion, a decline from S$12.3 billion in the previous auction. 

Applications for both competitive and non-competitive bids fell compared to the previous auction.

The amount of non-competitive bids fell to S$1.6 billion from S$1.9 billion in the previous auction. 

All eligible non-competitive bids received 100% allocation at the cut-off yield of 3.73% in this auction. 

The amount of non-competitive bids also fell to S$10.2 billion from S$10.4 billion in the previous auction.

It would seem like the lower cut-off yield in recent auctions has dampened demand for the 6-month T-bill. However, the total amount of applications remains elevated compared to levels we saw in June this year. 

#2 – Bids submitted at lower yield

Despite rising US government bond yields and 10-year Singapore government bond yields, it is worth noting that that the bids submitted for the 6-month T-bill were lower compared to the previous auction.

The median yield of bids submitted fell marginally to 3.63% from 3.64% in the previous auction.

The average yield of bids submitted fell to 2.86% from 3.17% in the previous auction. 

Looking at the median yield and cut-off yield, it would seem like there were a sizeable amount of bids that were made in the range of 3.63% to 3.73%. 

What would Beansprout do?

It would seem like the lower cut-off yield of 3.73% in the latest auction is due to slightly lower bids submitted by applicants compared to the previous auction.  

If you managed to subscribe to the latest 6-month T-bill using CPF-OA funds, find out how much more interest you will potentially earn compared to the OA interest rate using our CPF T-bill calculator. 

Interestingly, the significant amount of competitive bids in the range of 3.63% to 3.73% may also indicate that investors are referencing a slightly higher rate compared to the fixed deposit rate when putting in their competitive bids. 

For example, the best 6-month fixed deposit rate is now at 3.50% p.a., while the best 9-month fixed deposit rate is now at 3.55% p.a.

If we did not get our intended allocation of the T-bill, we can consider alternatives to park our savings while awaiting the next T-bill auction, which will be held on 31 August 2023.

More investors have been looking at cash management accounts to earn a potentially higher yield on their savings. 

Alternatively, we can also consider a high yield savings account. With GXS cutting its interest rates on its savings pocket, it might be worth looking at the CIMB Fast Saver account which is offering an interest rate of 3.5% p.a. , or the Stanchart eSaver account which is offering an interest rate of 3.4% p.a.

Find the best savings account to make your savings work harder using our interest maximiser tool.

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