T-bill yield remains steady at 3.74%. Here’s why it has stayed high

What happened?

Some investors appear happy with the latest Singapore T-bill auction result. 

The cut-off yield for the 6-month Singapore T-bill auction on 20 June (BS24112W) was at 3.74% , little changed from the previous auction.

This led some members in the Beansprout community to comment that it’s better than expected. 

After all, we have seen US government bond yields falling in recent weeks. 

In this post, I will look at why the cut-off yield for the Singapore T-bill has remained stable. 

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What we learnt from the latest 6-month Singapore T-bill auction

#1 - Demand for T-bills surged

The total amount of applications for the 6-month Singapore T-bill rebounded to S$15.5 billion, from S$14.2 billion in the previous auction. 

The amount of competitive bids was higher at S$12.4 billion, an increase from S$11.1 billion in the previous round.

If you had submitted a competitive bid at below 3.74%, you would receive 100% allocation of your T-bill bid amount.

If you had submitted a competitive bid at 3.74%, you would receive approximately 46% of your T-bill bid amount.

The amount of non-competitive bids was at S$3.1 billion, little changed from the previous auction.

As the amount of non-competitive bids is higher than the allocation limit, eligible non-competitive bids get 83% allocation. 

#2 Median yield rose while average yield fell 

The median yield of bids was at 3.54%, above the 3.50% in the previous auction.

Investors appear to be raising their yield expectations, with more bids at higher yields. This is despite the fall in US government bond yields in the past week. 

To me, this might be because some banks have raised their fixed deposit rates in recent weeks, consequently raising the bids that investors are putting in for the T-bill.

On the other hand, the average yield of bids was at 3.08%, marginally lower than the 3.15% in the previous auction.

#3 - Smaller amount of T-bills issued

The amount of T-bills issued in the latest auction was S$6.6 billion, down from S$7.1 billion in the previous auction.

With demand for the T-bills remaining strong, there were 2.35 bids for every offer, above the 2.0x in the previous auction. 

What would Beansprout do? 

For T-bill investors, the elevated cut-off yield for the latest 6-month Singapore T-bill of 3.74% should be good news. 

There seems to be a few factors that have helped to keep the cut-off yield steady in the recent auction.

Firstly, the higher demand and lower amount of T-bills issued may have led to downward pressure on the cut-off yield. 

However, investors appear to be putting in higher bids, as reflected in the increase in median yield for bids submitted compared to the previous auction. 

This may be driven by some banks offering higher fixed deposit rates in recent week. 

With a cut-off yield of 3.74%, the T-bill still offers a higher yield compared to the best 6-month fixed deposit rate of 3.35%. 

Hence, we consider the T-bill to be a safe way to a higher return on our savings in the short term. 

If you did not get your targeted allocation of the T-bill, there are a few other ways to earn a similar or higher yield on your savings compared to the latest cut-off yield of 3.74%.

• Moomoo Cash Plus offers a guaranteed return of 6.8% p.a. for up to 30 days for new users. Learn more here.
• Tiger Brokers is offering a bonus interest coupon of 6.8% p.a. for 30 days.  Learn more here.

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.

The next 6-month T-bill auction on 4 July 2024, and you can set a reminder by signing up for our free email alert. 

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