1 Year T-bill yield rises to 2.95%. What's driving the bounce?

What happened?

I've been eagerly awaiting the results of the latest 1-year Singapore T-bill auction, as there have been questions in the Beansprout community about whether it is better to apply for the 6-month or 1-year T-bill. 

Recently, we have seen the cut-off yield on the 6-month Singapore T-bill falling, with great volatility in global bond yields.

However, the cut-off yield for the 1-year Singapore T-bill (BY25100H) increased to 2.95% in the latest auction.

This would be higher compared to the yield of 2.71% in the previous auction.

Let us find out what may be driving the increase in the T-bill yield.

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What we learnt from the latest 1-year Singapore T-bill auction

#1 – Reduced demand for the latest T-bill

Firstly, I noticed a significant reduction in demand for the 1-year T-bill.

Total applications for the latest Singapore 1-year T-bill fell to S$10.1 billion from S$14.7 billion in the T-bill auction in October 2024. The previous time when applications were at this level was in April 2024. 

The amount of non-competitive bids fell to S$0.7 billion from S$0.8 billion in the previous auction.

Since the S$0.7 billion in non-competitive bids fell within the allocation limit, eligible non-competitive bids received a full 100% allocation at a cut-off yield of 2.95%. 

The amount of competitive bids fell to S$9.4 billion from S$13.9 billion in the previous auction.

This is in contrast to the sharp increase in demand for the 6-month T-bill, where applications rose to a record high in the most recent auction.

#2 – Higher average and median yield for bids submitted

The average yield of bids submitted increased to 2.72% from 2.47% in the previous auction.

The median yield of bids submitted also increased to 2.83% from 2.60% in the previous auction.

This likely reflects the increase in global bond yields since the previous auction, with the US Federal Reserve expected to slow down on its pace of interest rate cuts in 2025. 

#3 – Cut-off yield higher than breakeven yield for CPF OA applications

The cut-off yield of 2.95% is higher than the breakeven cut-off yield for T-bills applications using CPF OA.

As a recap, the cut-off yield for T-bill applications using CPF is higher than the current CPF OA rate of 2.5%, due to the potential loss of additional CPF interest when applying for T-bill using CPF savings. 

The latest 1-year T-bill yield of 2.95% is also higher the best 1-year fixed deposit rate in Singapore of 2.60% p.a.

With the increase in the 1-year T-bill yield, the gap between the best deposit rate and the T-bill yield has widened in the latest auction. 

What would Beansprout do? 

The increase in cut-off yield for the latest 1-year Singapore T-bill to 2.95% appears to be driven by a fall in demand for the 1-year T-bill.

At the same time, the average and median yields of bids submitted have increased, reflecting the bounce in global bond yields. 

With the rise in the T-bill yield, it is now higher than the best 1-year fixed deposit rate in Singapore of 2.60% p.a.

The yield of the 1-year Singapore T-bill of 2.95% is lower than that of the 6-month T-bill of 2.99%. 

However, we may still consider the 1-year Singapore T-bill over the 6-month Singapore T-bill to lock in the interest rates and not worry about re-investment risk.

If you managed to subscribe to the 1-year 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-Tbill calculator..

To find out how you can earn a yield of above 2.95%, you can check out the best place to park your savings here.

If you are interested in applying for the T-bill, there will be an upcoming 6-month T-bill auction on 28 January 2025.

You can set a reminder by signing up for our free email alert below

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