1-year T-bill yield falls to 3.7%. Here’s what we learnt from the latest auction

What happened?

Many in the Beansprout community were wondering if we might see a sharp decline in the yield in the 1-year Singapore T-bill auction (BY23103V) on 19 October.

This came about after the yield on the 6-month T-bill fell to 3.87% in the previous auction, driven by the surge in demand. 

There was hence a slight relief when it was announced that the cut-off yield for the latest 1-year T-bill auction was 3.70%.

The latest cut-off yield of 3.7% would represent just a slight decline from the cut-off yield of 3.74% in the previous auction in July.

Let us dive deeper to understand more about what is driving the lower yield on the 1-year T-bill.

What we learnt from the latest 1-year Singapore T-bill auction

#1 – Higher demand for latest T-bill compared to previous auction

The total amount of applications for the latest Singapore T-bill was at S$11.9 billion, a sizeable increase from the S$9.3 billion of application in the previous auction in July.

However, it remains below the S$12.7 billion of applications in the auction in April. The total amount of applications is also below the S$14.7 billion of applications we saw for the recent 6-month T-bill auction.

The amount of competitive bids increased to S$10.5 billion from S$8.5 billion in the previous auction.

The amount of non-competitive bids increased to S$1.4 billion from S$0.8 billion in the previous auction. 

This would also represent the highest amount of non-competitive bids in the 1-year T-bill auctions this year. 

As the S$1.4 billion of applications is below the allocation limit, eligible non-competitive bids were able to get 100% allocation at the cut-off yield of 3.7%.

#2 – Higher median and average cut-off yield submitted

Despite concerns that there might by lower bids submitted by applicants to ensure 100% allocation, the median yield and average yield were higher in the latest auction compared to the previous one in July.

The median yield of bids submitted rose to 3.55% from 3.5% in the previous auction.

The average yield of bids submitted rose to 3.32% from 3.09% in the previous auction.

The increase in the median and average yields in the latest auction would reflect the rise in government bond yields over the past few months. 

What would Beansprout do?

The lower cut-off yield of 3.7% in the latest auction compared to the previous auction seems to be driven by a surge in demand for the 1-year T-bill.

This is similar to what we have seen in the latest 6-month T-bill auction, where demand also rose significantly.

However, it is worth noting that the average and median yield of bids submitted by applicants were higher than the previous auction, consistent with the increase in bond yields over this period.

Despite the fall in cut-off yield in the 1-year T-bill, it remains higher than the current best fixed deposit rate of 3.6%. 

If you were successfully allocated the 1-year T-bill, check out our CPF T-bill calculator to find out how much more interest you would potentially earn with the latest 1-year T-bill.

As this is the last 1-year T-bill auction in 2023, investors who are keen to participate in the next 1-year T-bill auction will have to wait till next year.

In the meantime, there will be a 6-month T-bill auction on 26 October. The latest issuance of the Singapore Savings Bonds also remain open for applications.  

If you are looking to park your spare cash in the meantime, you can learn more about how cash management accounts aim to provide higher potential returns compared to savings accounts, and greater flexibility compared to fixed deposits. 

Otherwise, you can consider high-yield savings accounts that may allow you to earn a higher interest rate on your savings. 

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