T-bill yield rebounds to 3.08%. What's driving the increase?

What happened?

The results for the latest 6-month Singapore T-bill auction are out.

The cut off yield for the 6-month Singapore T-bill (BS24123F) auction on 21 November rose to 3.08%. 

This represents the second consecutive increase after the cut off yield rose to 3.04% in the previous 6-month Singapore T-bill (BS24121A) auction on 7 November. 

I noticed that investors in the Beansprout community appear quite happy with the bounce in the T-bill yield. 

In this article, I will dive into the most recent 6-month Singapore T-bill allotment result to understand what may be driving the higher yield. 

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

#1 - Demand for the Singapore T-bill rose

The total applications for the 6-month Singapore T-bill increased to S$13.7 billion from S$12.3 billion in the previous auction.

This would represent a reversal in demand for the 6-month T-bill after declines in the two previous auctions. 

The amount of competitive bids rose to S$11.7 billion from S$10.7 billion in the previous auction.

If you placed a competitive bid below 3.08%, you would receive 100% of your requested T-bill allocation.

For those who bid at exactly 3.08%, the allocation would be around 91%. 

Meanwhile, non-competitive bids increased slightly to S$2 billion from S$1.6 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 to S$7 billion, from S$6.8 billion the previous auction.

With total applications increasing from S$12.3 billion to S$13.7 billion, the ratio of applications to T-bills issued rose from 1.82x to 1.96x.

#3 - Average yield of T-bill bids increased 

The average yield of bids submitted rose slightly to 2.76% from 2.72% in the previous auction. This would be inline with the bounce in government bond yields we have seen in recent weeks. 

The median yield of bids came in at 2.95%, unchanged from the previous auction. 

Given the median yield and the cut-off yield, this suggests that a substantial number of bids were placed in the 2.95% to 3.08% range, slightly above the breakeven yield for CPF applications. and close to the best fixed deposit rates in Singapore. 

What would Beansprout do? 

The 6-month Singapore T-bill yield has risen to 3.08% in the latest auction, with an increase in the average yield of bids submitted. 

This appears to be driven by the bounce in government bond yields we have seen in recent weeks. 

The cut-off yield of 3.08% in the latest auction would be higher than the best 6-month fixed deposit rate in Singapore of 2.90%. However, it is below the best 12-month fixed deposit rate in Singapore of 3.20%. 

It would also be close to 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 is above 3%, I would still be looking for other places to park my money to earn a higher yield, such as high yield savings accounts. 

The next 6-month T-bill auction on 5 December 2024, and you can set a reminder by signing up for our free email alert. 

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