T-bill yield rises to 3.98%: Demand stays red-hot despite fixed deposit rush



By Beansprout • 02 Mar 2023 • 0 min read

The total amount of applications rose to S$13 billion in the latest T-bill auction on 2 March.

T-bill auction 2 March 2023
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What happened?

The cut-off yield for the latest Singapore T-bill auction (BS23104X) on 2 March 2023 rose further to 3.98% p.a. 

It would seem like investors are taking notice of the T-bill once again with the higher yields offered. 

This led to an increase in total applications for T-bills compared to the previous auction, when some investors may have decided to put their CPF OA funds into the OCBC 8-month fixed deposit offering 3.88% p.a.

Let’s take a look and find out what drove the bond yield up even as the total amount of applications rose.  


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Source: MAS


What we learnt from the latest T-bill auction

#1 – Significantly more applications for T-bill 

The total amount of applications for the latest T-bill was at $13.0 billion, rising from S$11.0 billion in the previous auction.

This would be close to the amount of applications for the auctions on 18 January and 2 Feb, when the cut-off yields were in the range of 3.88% and 4%. 

It would appear that demand for T-bills has returned after the dip when OCBC started offering a 8-month fixed deposit at 3.88% for CPF-OA funds. 

It is also interesting to note that the increase in T-bill applications came through largely from competitive bids. 

The amount of competitive bids rose to S$12.3 billion from S$10.3 billion in the previous auction.

However, the amount of non-competitive bids fell further to S$702 million from S$737 million in the last auction. It’s now significantly lower compared to the peak of S$3.6 billion in November. 

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#2 – Increase in yields submitted for competitive bids

Despite the increase in total amount of T-bill applications, the bid yields were generally higher compared to the previous auction.

As we shared earlier, the cut-off yield is determined not just by the total amount of applications, but also the yields that investors are putting in their competitive bids. 

The median yield rose to 3.88% p.a. from 3.70% in the previous auction, reversing a declining trend we have seen recently. 

For those who are not familiar with the median yield, it is the middle of all the competitive bids that were allotted the T-bill.

The average yield was at 3.58%, also significantly higher than compared to the average yield of 3.26% in the previous auction.

This would mean that there were less bids submitted at very low yields compared to auction on 16 Feb.

The higher median and average yields could be due to an increase in US bond yields in recent weeks.

Or it could also be due to a smaller proportion of applications made using CPF OA funds where the bids might be lower. 

Comparing the median yield and cut-off yield, there were close to S$2 billion of competitive bids that were made between the median yield of 3.88% and the cut-off yield of 3.98%.

That's quite close to some of the better fixed deposit interest rates available in the market.

Median yield of T-bill bids rose

What would Beansprout do?

The higher T-bill yield should be good news to investors who are looking for a safe place to park their spare cash. 

This comes as interest rate movements have been more mixed in recent weeks. 

OCBC stopped offering the promotional rate of 3.88% p.a. for fixed deposits using CPF OA funds, and several banks started cutting their fixed deposit rates. 

However, the interest rate on the UOB Stash account was raised to up to 5% p.a.

If you were not able to get your allocation of T-bills through cash applications, we were still able to find a few fixed deposit accounts that offer an interest rate of close to 4%.

If you’re interested in the next T-bill auction that is coming up on 16 March, we share how you can now apply for T-bills using CPF-OA via DBS internet banking.  

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