T-bill yield rebounds slightly to 3.02%. Here’s why.

What happened?

The results for the last 6-month Singapore T-bill auction of 2024 are out.

The cut off yield for the 6-month Singapore T-bill (BS24125S) auction on 19 December was at 3.02%. 

This is slightly higher than the cut-off yield of 3.0% in the previous T-bill auction on 5 December. 

As always, there has been a lot of discussion in the Beansprout Telegram community about the T-bill auction.

In this post, I will dive deeper into the most recent 6-month Singapore T-bill allotment result.

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

#1 - Demand for the Singapore T-bill fell 

The total applications for the 6-month Singapore T-bill amounted to S$15.8 billion, a decline from S$17.4 billion in the previous auction.

Despite the lower applications compared to the previous auction, demand for the T-bill remains fairly elevated.

In fact, total applications would be the second highest level since August this year. 

The amount of competitive bids fell to S$13.5 billion from S$15.0 billion in the previous auction. 

If you placed a competitive bid below 3.02%, you would receive 100% of your requested T-bill allocation.

For those who bid at exactly 3.02%, the allocation would be around 10%. 

Meanwhile, non-competitive bids fell to S$2.3 billion from S$2.4 billion in the previous auction.

Since these bids were within the allocation limit, all eligible non-competitive bids received a full 100% allocation. 

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

The amount of T-bills issued fell to S$6.8 billion from S$7.1 billion in the previous auction. 

With total applications falling from S$17.0 billion to S$15.8 billion, the ratio of applications to T-bills issued fell slightly from 2.45x to 2.33x. 

Once again, this represents a fairly elevated ratio of applications to T-bills issued. 

#3 - Median yield of T-bill bids rose 

The median yield of bids submitted rose to 2.95% from 2.90% in the previous auction.

The rise in median yield of bids submitted would be inline with the bounce in the US government bond yield and Singapore government bond yields over the past two weeks.

However, the average yield of bids submitted declined from 2.73% to 2.66%. 

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 2.95% to 3.02% range, slightly above the breakeven yield for CPF applications. and close to the best fixed deposit rates in Singapore. 

What would Beansprout do? 

The slight bounce in the latest 6-month Singapore T-bill auction appears to be driven by an increase in the median yield of bids submitted with the bounce in government bond yields.

The cut-off yield of 3.02% in the latest auction would be close to the best fixed deposit rates in Singapore.

It would also be close to 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.

Although the Singapore T-bill yield has stayed above 3%, I would still be looking for other places to park my money to earn a higher yield. Find out what are some of these options to explore here. 

The next 6-month T-bill auction on 2 January 2024, and you can set a reminder by signing up for our free email alert. 

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