T-bill yield rises to 3.8% despite demand surge. Why the jump?

What happened?

Many in the Beansprout community were happy with the result of the latest 6-month Singapore T-bill auction.

The cut-off yield on the 6-month Singapore T-bill auction (BS24106W) on 27 March rose to 3.8% from 3.78% in the previous auction.

This may come as a surprise to some investors as we have seen with fixed deposit rates and government bond yields falling in recent weeks.

Let us find out what led to the increase in the yield on the Singapore T-bill.

Don't miss out 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

Here’s what you need to know about the latest 6-month Singapore T-bill auction result

#1 – Higher demand for T-bills

The total amount of applications for the 6-month Singapore T-bill jumped to S$15.6 billion from S$14.4 billion in the previous auction.

This would also mark the highest amount of applications for the T-bill on record, exceeding the previous peak of S$14.7 billion in October last year.

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

This would also exceed the previous high for non-competitive bids of S$11.9 billion. 

The amount of non-competitive bids was stable at about S$2.6 billion.

As the amount of non-competitive bids exceeded the allocation limit of S$2.4 billion, eligible non-competitive bids were only able to get approximately 94% allocation. 

Overall, it would seem that the potential loss of additional CPF interest did little to dampen demand for the latest 6-month Singapore T-bill.

#2 – Smaller size of issuance had limited impact on T-bill auction result

Earlier, we shared that the amount of T-bills issued in the latest auction will fall to S$6.1 billion. 

This represents a slight decrease of S$200 million compared to issuance size of S$6.3 billion in the previous auction.

While this impacted the allocation to non-competitive bids, the smaller issuance size seemed to have less of an impact to the cut-off yield which remained elevated. 

#3 – Higher yield for bids submitted

The median yield and average yield of bids submitted continue to rise compared to the two previous auctions.

The median yield of bids rose slightly to 3.61% from 3.60% in the previous auction.

The average yield of bids also increased slightly to 3.34% from 3.30% in the previous auction.

Hence, it would seem like investors have kept their competitive bids fairly high, even as fixed deposit rates have fallen in recent weeks.

What would Beansprout do?

The higher cut-off yield on the latest 6-month Singapore T-bill auction is definitely good news for investors. 

This is driven by the higher average and median yields of bids submitted even as there was a surge in demand.

As the T-bill yield has remained elevated while fixed deposit rates have been falling, there is now a significant gap in the interest rate offered by the two instruments.

For example, the best 6-month fixed deposit rate is currently at 3.35%, below the cut-off yield of 3.8% offered by the latest T-bill. 

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 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.

For those who did not get your intended allotment of the T-bill, you can consider alternatives to park your savings before the next 6-month T-bill auction on 11 April 2024.

For example, cash management accounts allow you to earn a potentially higher return on your cash in a relatively safe way.  

Otherwise, you can consider high-yield savings accounts that may allow you to earn a higher interest rate on your savings. 

To learn more about the T-bill including how to apply, check out our comprehensive T-bill Guide.

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

[Last few days] Get a free S$50 NTUC voucher and five free shares worth up to US$2500 when you sign up for a Webull account. Promo ends 30 March. Learn more here.

Don't miss out 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