T-bill yield dives to 2.97%. Here's why it has fallen further

What happened?

I've noticed that discussions about Singapore T-bills have become less frequent in the Beansprout community lately.

After all, the yield on the 6-month T-bill has fallen to 3.10% in the previous auction.

In the most recent 6-month Singapore T-bill (BS24119S) auction on 26 September, the yield has fallen further to 2.97%.

This would mark the first time the T-bill yield has fallen below 3% since September 2022.

In this post, I will explore the factors contributing to the decline in the Singapore T-bill yield.

Stay updated on the next T-bill

Sign up to receive a free email reminder when the next Singapore T-bill auction is open.

Subscription preferences

• Reminder for Tbill

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

#1 - Demand for the Singapore T-bill increased slightly

The total applications for the 6-month Singapore T-bill amounted to S$13.9 billion, an increase from S$13.4 billion in the previous auction.

The amount of competitive bids rose to S$12.4 billion from S$11.7 billion in the previous auction.

If you placed a competitive bid below 2.97%, you would receive 100% of your requested T-bill allocation.

For those who bid at exactly 2.97%, the allocation would likely be around 95%. 

Meanwhile, non-competitive bids decreased to S$1.5 billion from S$1.7 billion in the previous auction. 

Since these bids were within the allocation limit, all eligible non-competitive bids received a full 100% allocation.

#2 Average yield of T-bill bids was lower

The median yield of bids came in at 2.85%, down from 3.01% in the previous auction, while the average yield dropped to 2.79% from 2.90%. 

This would follow the fall in short term bond yields in the past week, after the US Federal Reserve cut its benchmark interest rate sharply by 0.5%.

Given the median yield and the cut-off yield, it suggests that a substantial number of bids were placed in the 2.85% to 2.97% range.

#3 - Slightly smaller issuance size compared to the previous auction

The amount of T-bills issued was S$6.8 billion, slightly smaller than S$6.9 in the previous auction.

With total applications rising from S$13.4 billion to S$13.9 billion, the bid-to-offer ratio increased from 1.95x to 2.05x.

What would Beansprout do? 

The recent US interest rate cut has led to a further decline in the cut-off yield of the latest Singapore 6-month T-bill auction. 

Following the decline, the cut-off yield on the 6-month Singapore T-bill has fallen to below 3% for the first time since September 2022.

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.

With the sharp fall in the T-bill yield, we would start to look for other ways to earn a higher yield on our cash. 

If you are looking for a safe option to park your savings, the best 6-month fixed deposit rate in Singapore is higher than the T-bill yield at 3.20% p.a.

Some of the other ongoing promotions include:

• Tiger Brokers is offering a interest bonus coupon that allows you to earn 6.8% p.a. with Tiger Vault. Learn more about the Tiger Vault promotion here.
• Moomoo Singapore is offering a guaranteed return of 6.8% p.a.  when you deposit your funds into Moomoo Cash Plus. Learn more about the Moomoo Cash Plus promotion here.

Singapore REITs are also commonly seen as potential beneficiaries when interest rates decline. We find out how you can gain exposure to Singapore REITs through an exchange traded fund (ETF) here. 

The next 6-month T-bill auction on 10 October 2024, and you can set a reminder by signing up for our free email alert. 

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

Join the Beansprout Telegram group for the latest insights on Singapore stocks, REITs, bonds and ETFs.