T-bill yield falls to 3.73%. Here’s what we learnt from the latest auction.

What happened?

Many investors were eagerly anticipating the latest 6-month Singapore T-bill auction result.

After all, global bond yields have declined sharply after the most recent Fed meeting. 

For T-bill investors, the good news is that the cut-off yield for the 6-month Singapore T-bill (BS23125H) was at 3.73%, falling only slightly from the previous auction.

Let us dive deeper to find out why the Singapore T-bill yield has remained elevated even as US bond yields have fallen sharply. 

What we learnt from the latest Singapore T-bill auction

#1 – T-bill demand fell from previous issuance but remains elevated

The total amount of T-bill applications fell slightly compared to the previous auction.

There were S$12.8 billion of applications for the latest 6-month Singapore T-bill, lower than the S$13.3 billion of applications in the previous auction. 

The amount of non-competitive bids fell slightly to S$2.2 billion from S$2.5 billion in the previous auction. 

Eligible non-competitive bids were able to get 100% allocation in the latest T-bill auction, as the amount of non-competitive bids was within the allocation limit.

The amount of competitive bids also fell slightly to S$10.6 billion from S$10.8 billion in the previous auction. 

However, demand remains elevated with the amount of competitive bids remaining higher than most of the third quarter of this year. 

#2 - Median and average yield declined

The median yield of bids submitted fell slightly to 3.58% from 3.60% in the previous auction, reflecting the fall in global bond yields in recent weeks. 

The average yield of bids submitted also fell to 2.94% from 3.05% in the previous auction. 

We noted earlier that bond yields have declined in recent weeks after the US Federal Reserve projected that we might see three rate cuts in 2024. 

#3 - Smaller issuance size compared to the previous issuance 

Despite the fall in demand for the T-bills, one of the reasons the cut-off yield did not go up may be because of the smaller T-bill issuance size. 

The amount of T-bills issued fell to S$5.6 billion from S$5.9 billion in the previous auction.

With the smaller issuance size and lower median yield of bids submitted, the cut-off yield also declined slightly in the latest auction.

What would Beansprout do? 

With some banks starting to cut their fixed deposit rates following Fed’s latest meeting, Singapore T-bill investors may be relieved to see that the yield on the T-bill has not fallen by much. 

In fact, the cut-off yield on the latest 6-month T-bill remains higher than the best 6-month fixed deposit rate of 3.65%. 

Hence, it would appear that the T-bill remains a safe way to earn a higher return on our savings in the short term. 

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.

For those who did not get your intended allotment of the T-bill, you can consider alternatives to park your savings before the next 6-month T-bill auction on 4 January 2024.

For example, cash management accounts allow you to earn a potentially higher return on your cash in a relatively safe way.  

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

If you would like to secure the high yields over a longer time period, then it might be worth considering Singapore Savings Bonds (SSBs), where the current issuance offers a 10-year average return of 3.07% per year. 

Lastly, Syfe Cash+ Guaranteed recently raised the guaranteed return offered to investors to 4.0% per annum. Find out if it is a better option compared to T-bills here.

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