T-bill yield rises to 3.05%. Why the increase?

What happened?

The results for the first 6-month Singapore T-bill auction of 2025 are out.

The cut off yield for the 6-month Singapore T-bill (BS25100E) auction on 2 January was at 3.05%. 

This is slightly higher than the cut-off yield of 3.02% in the previous T-bill auction on 19 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$13.7 billion, a decline from S$15.8 billion in the previous auction.

Total applications fell to the same level as the auction on 21 November 2024.

The amount of competitive bids fell to S$11.5 billion from S$13.5 billion in the previous auction. 

If you placed a competitive bid below 3.05%, you would receive 100% of your requested T-bill allocation.

For those who bid at exactly 3.05%, the allocation would be around 21%. 

Meanwhile, non-competitive bids fell slightly to S$2.2 billion from S$2.3 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 larger than the previous T-bill auction

The amount of T-bills issued increased slightly to S$6.9 billion from S$6.8 billion in the previous auction. 

With total applications falling from S$15.8 billion to S$13.8 billion, the ratio of applications to T-bills issued fell significantly from 2.33x to 1.99x. 

In previous years, we have also seen a fall in the applications for the T-bill towards the year end. 

The lower amount of T-bill applications compared to the issuance size may have helped to support the T-bill cut-off yield. 

#3 - Median and average yield of T-bill bids fell

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

The median yield of bids submitted fell despite the bounce in the US government bond yield and Singapore government bond yields over the past two weeks.

Similarly, the average yield of bids submitted declined from 2.66% to 2.58%. 

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 2.90% to 3.05% 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 yield appears to be driven by the the fall in applications with the year-end holidays.

However, we have not seen an increase in the median and average yields of bids submitted, despite the rise in US government bond yields in recent weeks. 

The cut-off yield of 3.05% in the latest auction would be above the best fixed deposit rates in Singapore.

It would also be above 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 16 January 2025, and you can set a reminder by signing up for our free email alert. 

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