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T-bill yield falls further to 3.9%! Here's what we learnt from the latest allotment result

24 Nov 2022

In the latest auction on 24 November, the cut-off yield on the Singapore 6-month T-bill auction fell further to 3.90% p.a.

What happened?

There’s something that investors in Singapore have been looking out closely for in recent weeks.

And no, it’s not the World Cup.

Many in the Beansprout community were eagerly awaiting the latest 6-month T-bill auction, especially after the yield came down in the previous auction.

Disappointingly, the yield came down further to 3.9% p.a. in the latest auction on 24 November (BS22123S). 

We decided to take a closer look into why the yield has continued to decline. 

Source: MAS

What we learnt from the T-bill auction results

#1 – Fall in demand for T-bills

Firstly, it is clear that the level of subscriptions for T-bills came down this auction. 

The total amount of subscriptions fell to S$11.9 billion from S$14.2 billion in the previous auction.

The amount of non-competitive bids came down to about S$2.5 billion from S$3.6 billion in the previous auction. That’s a decline of about S$1.1 billion. 

The amount of competitive bids also came down to about $9.4 billion from $10.6 billion in the previous auction. That’s a decline of about S$1.2 billion. 

This can potentially be attributed to a few reasons. 

It could be more attractive returns now being offered for fixed deposit accounts, some investors deciding to sit out from the auction due to uncertainty of the cut-off yield, or simply investors having deployed most of their capital in previous T-bill auctions. 

T-bill bids

#2 – Non-competitive bids received more allocation 

The S$2.5 billion of non-competitive bids for T-bills is still sizeable, such that it exceeded the S$1.9 billion of T-bills allocated to non-competitive bids this time. 

This would be the second time in recent auctions that non-competitive bids were not able to get full allotment. 

However, with the fall in non-competitive bids for the T-bills, the percentage of non-competitive bids allocated rose to 77.78% from 49.68% in the previous auction. 

#3 – More competitive bids below 4% drive cut-off yield down

T-bill auction Singapore competitive

The further decline in cut-off yield to 3.9% from 4.0% in the previous auction might be disappointing to some investors. 

After all, global interest rates have remained relatively flat compared to the previous auction, and the current market yield for the 6-month T-bill is still at around 4.0% p.a.

As we shared earlier, the cut-off yield for the T-bill auction is determined by the competitive bids that are made. 

If there are many people making competitive bids at low yields, then the cut-off yield for the T-bill would potentially be lower. 

The average yield for competitive bids was at 3.26% p.a. this auction. This is higher than the average yield for competitive bids of 2.87% p.a. in the previous auction. 

Next, we can also look at the median yield which was at 3.5% this auction. This is unchanged from the previous auction. 

What this means is that either by looking at the average or median yield, investors are not putting in very low bids compared to the previous auction. 

So why is the T-bill yield down? 

There are probably more investors who submitted bids in the range of 3.5-3.9%, which would have brought down the cut-off yield to 3.9%. 

What would Beansprout do?

If you did not get your target allocation in the latest T-bill auction, the good news is that there are now more alternatives in the market. 

The interest rates for fixed deposits have moved up in the last few weeks, and are now getting close to the 3.9% yield on the T-bill. 

For example, UOB is now offering a promotional interest rate of 3.55% for fixed deposits of 6, 10, and 12 month tenor. The interest rates go up to 3.85% for deposits of $50,000 to $999,999.

CIMB is offering a promotional interest rate of 3.85% for a fixed deposit of 12 months. 

Hong Leong Finance is offering a promotional interest rate of 3.80% for a fixed deposit of at least S$50,000 over 11 months. 

If you are still interested in the T-bill as a way to park your spare cash, the next 6-month T-bill auction will be on 8 December 2022. 

In the meantime, it’s not too late to share with your friends our tips on bidding for the T-bill like a pro. 

If you’ve a burning question, ask one of the shifus in our Telegram group

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