T-bill yield falls further to 3.65%. Here’s what led to the decline.

What happened?

Some investors in the Beansprout community appear disappointed with the latest T-bill auction result today. 

The cut-off yield for the 6-month Singapore T-bill auction (BS24110T) on 23 May was at 3.65%, declining further from 3.7% in the previous auction.

It is also lower than the closing yield of the 6-month T-bill as of 16 May.

This is the fourth consecutive decline in the cut-off yield on the 6-month T-bill, after it reached a recent high of 3.8% on 27 March. 

Let us find out why the yield on the Singapore T-bill has declined in the latest auction. 

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

#1 - Demand fell compared to the previous auction

The total amount of applications for the 6-month Singapore T-bill fell to S$14.5 billion, from the record S$16.3 billion in the previous auction.

Applications for both competitive and non-competitive bids fell. Overall, the bid to offer ratio is 2.07x, down from 2.4x in the previous auction.

The amount of competitive bids fell to S$11.8 billion, down from S$13 billion in the previous auction.

If you had submitted a competitive bid at 3.64% or below, you would receive 100% allocation of your T-bill bid amount.

If you had submitted a competitive bid at 3.65%, you would receive approximately 90% of your T-bill bid amount.

The amount of non-competitive bids maintained at S$2.7 billion, similar to the previous auction.

As the amount of non-competitive bids is equivalent to the allocation limit, eligible non-competitive bids were able to get 100% allocation. 

#2 - Average and median yield of bids declined 

The median yield of bids was at 3.48%, below the 3.55% in the previous auction.

The average yield of bids was at 3.04%, a second consecutive month of decline from 3.13% in the previous auction.

The decline in median and average yields of bids submitted is inline with the fall in US government bond yields in recent weeks, as investors gain confidence about a potential Fed rate cut in the coming months again. 

At the same time, T-bill investors may also be increasingly taking into consideration the significant gap between the T-bill yield and the best fixed deposit rates. 

#3 - A larger issuance size provided some support to cut-off yield

What we noticed is that despite the lower median and average yields of bids submitted, the cut-off yield fell by a smaller amount.

This is likely because of the larger amount of T-bills issued. 

The amount of T-bills issued in the latest auction rose to S$7 billion from S$6.8 billion in the previous auction. 

Together with the lower demand for T-bills, the cut-off yield fell marginally to 3.65% from 3.7% in the previous auction.

What would Beansprout do? 

The fall in the cut-off yield to 3.65% in the latest auction appears to be driven by lower yields of bids submitted.

This is likely due to the fall in government bond yields in recent weeks, as well as the significant gap in the T-bill yield compared to fixed deposit rates. 

However, the yield on the T-bill remains high compared to its historical average levels. 

Despite the fall in the cut-off yield on the 6-month T-bill, it remains attractive compared to the best 6-month fixed deposit rates of 3.35% p.a. 

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

If you are looking for ways to earn a higher yield on your savings compared to the latest cut-off yield of 3.65%, there are a few options to consider:

• Syfe Cash+ Guaranteed offers a guaranteed return of 3.75% p.a. for a 6-month term. Learn more here.
• Webull Moneybull offers a promotional interest of up to 8.4% p.a. for up to 180 days for new and existing users. Learn more here.
• Moomoo Cash Plus offers a guaranteed return of 6.8% p.a. for up to 30 days for new users. Learn more here.

To find out how much more interest you can potentially earn on the T-bill compared to the CPF OA interest rate, check out our CPF T-bill calculator.

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

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If you are new to investing in the T-bill, check out our comprehensive guide to Singapore T-bills to learn more.

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