The cut-off yield for latest Singapore 6-month T-bill fell to 3.85% from 3.99% in the previous auction.
The cut-off yield for the latest Singapore 6-month T-bill auction (BS23114A) on 20 July fell to 3.85%.
This might be a disappointment to some investors who were attracted to the 6-month T-bill after the cut-off yield reached 3.99% in the previous auction.
Let’s take a deep dive into what might be causing the decline in the yield on the 6-month T-bill.
What we learnt from the latest T-bill auction
#1 – Increase in amount of competitive bids
The total amount of applications for the latest T-bill was at S$12.2 billion, a significant increase from S$10.3 billion in the previous auction.
This is driven largely by a sharp rise in the amount of competitive bids to S$10 billion from S$8.1 billion in the previous auction. It would also represent the highest amount of competitive bids since 25th May.
It would seem like the higher cut-off yield in the previous auction has led to more bids for the 6-month T-bill once again.
#2 – T-bill issuance size larger than in the past
Eligible non-competitive bids received 100% allocation in this auction, unlike the previous auction where non-competitive applications were only able to receive about 96% of their bid amounts.
The amount of non-competitive bids was similar to the previous auction at S$2.2 billion.
However, as the amount of T-bills offered increased to S$5.6 billion in the latest auction from S$5.4 billion in the previous auction, the amount of non-competitive bids now represent slightly less than 40% of the T-bills offered in the auction .
#3 – Median yield of bids submitted rose
While the cut-off yield fell in the latest T-bill auction, we saw higher average and median yields of bids submitted.
The median yield rose to 3.65% from 3.50% in the previous auction.
The average yield rose to 2.88% from 2.87% in the previous auction.
Hence, it would seem like the lower cut-off yield in the latest auction auction is largely driven by more applications submitted, and a sizeable portion of these bids being placed in the range of 3.65% to 3.85%.
This would mirror the fall in US government bond yields in recent weeks.
What would Beansprout do?
Despite the fall in cut-off yield compared to the previous auction, the 6-month T-bill still offers a fairly decent yield of 3.85%.
This is higher than the best 6-month fixed deposit rate of 3.50%, and also the interest rate offered by GXS bank's savings account of 3.48%.
If you missed out on the latest T-bill auction, the next 6 month T-bill auction will be held on 3 August. There will also be a 1-year T-bill auction on 27 July.
Check out our CPF-Tbill calculator to find out how much more interest you can potentially earn by investing in the Singapore T-bill using your CPF Ordinary Account (OA) savings.
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