T-bill yield falls further to 3.64%. Why the decline?

What happened?

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

The cut-off yield for the 6-month Singapore T-bill (BS24114V) on 18 July fell to 3.64% from 3.7% in the previous auction.

This would represent a fairly sizeable decline from a yield of 3.76% in the auction on 6 June.

I saw that some investors in the Beansprout community were interested to find out why the yield is lower. 

In this post, I will be sharing more about why the cut-off yield for the Singapore T-bill fell.

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

#1 - Demand for the Singapore T-bill remained strong

The total amount of applications for the 6-month Singapore T-bill rise slightly to S$15.7 billion, from S$15.6 billion in the previous auction. 

The amount of competitive bids rose to S$12.4 billion, from S$11.9 billion in the previous round.

If you had submitted a competitive bid at below 3.64%, you would receive 100% allocation of your T-bill bid amount.

If you had submitted a competitive bid at 3.64%, you would receive approximately 83% of your T-bill bid amount.

However, the amount of non-competitive bids fell to S$3.3 billion from S$3.7 billion in the previous auction.

As the amount of non-competitive bids is higher than the allocation limit, eligible non-competitive bids get 82% allocation. 

#2 Median yield and average yield were higher 

The median yield of bids was 3.50%, slightly higher than 3.4% in the previous auction.

The average yield of bids was 2.97%, also higher than the 2.81% in the previous auction.

While the median and average yields of bids were higher, the cut-off yield was lower than the previous auction.

This might mean that while there were a smaller amount of bids at very low yields in the latest auction. 

In addition, there appears to be a sizeable amount of bids in the range of 3.50% to 3.64%.

This would be consistent with the fall in global bond yields in recent weeks, as the weak US retail sales and softer inflation data have raised confidence of an imminent rate cut by the Fed in September.

#3 Slightly larger issuance size compared to previous auction

The amount of T-bills issued was S$6.8 billion, an increase from S$6.5 billion in the previous auction.

As the demand for T-bills has risen by just about S$100 million, the bid to offer ratio was 2.3x, marginally lower than the previous auction’s 2.4x.

What would Beansprout do? 

The decline in the cut-off yield in the latest 6-month T-bill auction appears to be largely driven by more bids submitted in the range of 3.50% to 3.64% compared to the previous auction.

In particular, it is worth noting that the cut-off yield on the T-bill has been on a declining trend in recent auctions.

While this is still higher than the best 6-month fixed deposit rates of 3.4% p.a., the difference between the yields has narrowed. 

With the fall in the T-bill yield, we would also start to look for other ways to earn a higher yield on our cash.

Some of the ways include:

• Tiger Brokers is offering a interest bonus coupon that allows you to earn 6.8% p.a. with Tiger Vault. Learn more about the Tiger Vault promotion here.
• Moomoo Singapore is offering a guaranteed return of 6.8% p.a.  when you deposit your funds into Moomoo Cash Plus. Learn more about the Moomoo Cash Plus promotion here.
• Syfe Cash+ Guaranteed offers a guaranteed return of 3.7% per annum for a term of 3 months as of 18 July 2024. Learn more about Syfe Cash+ Guaranteed here. 

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.

The next 6-month T-bill auction on 1 August 2024, and you can set a reminder by signing up for our free email alert. 

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If you are new to investing in the T-bill, check out our comprehensive guide to Singapore T-bills to learn more.

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