T-bill yield bounces to 3.04% as demand dips

What happened?

The results for the latest 6-month Singapore T-bill auction on Lunar New Year eve are out.

While I was busy doing my spring cleaning, I came across an update  in the Beansprout Telegram community that cut off yield for the 6-month Singapore T-bill (BS25101F) auction on 28 January was at 3.04%.

This would represent an increase in the T-bill yield compared to the cut-off yield of 2.99% in the previous 6-month T-bill auction on 16 January. 

Likewise, we also saw a bounce in the yield for the 1-year T-bill in the auction last week. 

In this post, I will share what led to the increase in the cut-off yield for the T-bill, so that you can stay updated while enjoying your reunion dinner or Lunar New Year gathering. 

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

#1 - Demand for the Singapore T-bill fell

The total applications for the 6-month Singapore T-bill amounted to S$15.3 billion, a decline from the record high of S$18.4 billion in the previous auction.

Despite the fall in demand, applications for the T-bill remain elevated, surpassing the S$13.7 billion of application in the auction on 2 January 2025. 

The amount of competitive bids fell to S$13.0 billion from S$15.2 billion in the previous auction. 

If you placed a competitive bid below 3.04%, you would receive 100% of your requested T-bill allocation.

If you bid at exactly 3.04%, the allocation would be around 71%. 

The amount of non-competitive bids fell to S$2.3 billion from about S$3.2 billion in the previous auction.

Since the amount of non-competitive bids was within the allocation limit, all eligible non-competitive bids received full allocation for the T-bill. 

#2 - Potential loss of additional CPF interest in latest T-bill auction

Earlier, we shared that there will be potentially 8 months of CPF interest loss from January to August in this T-bill auction. 

This is because the T-bill issuance date is on 4 Feb 2025 and the maturity date is on 5 August 2025. 

Based on sharing from the Beansprout community, the deduction for successful CPF applications is typically done one business day after the auction date.

The loss of additional CPF interest will mean that the break-even yield for the T-bill auction will be higher for CPF applications. 

This might have led to lower applications for the latest 6-month T-bill. 

With total applications falling from S$18.4 billion in the previous auction to S$15.3 billion and an unchanged amount of T-bills issued, the ratio of applications to T-bills issued fell from 2.55x to 2.13x. 

The fall in the amount of T-bill applications compared to the issuance size may have contributed to the higher T-bill cut-off yield. 

#3 - Median and average yield of T-bill bids rose

The median yield of bids submitted increased to 2.97% from 2.88% in the previous auction.

The increase in median yield would follow the trend of higher global bond yields we have seen in recent weeks. 

Similarly, the average yield of bids submitted rose from 2.52% to 2.69%. 

Given the median yield and the cut-off yield, this suggests that a substantial number of bids were placed in the 2.97% to 3.04% range, slightly above the breakeven yield for CPF applications. 

What would Beansprout do? 

The bounce in the T-bill yield appears to be driven by a fall in demand, likely from CPF investors due to the potential loss of additional CPF interest in the current auction. 

At the same time, the median yield of bids submitted has also increased with the rise in global bond yields. 

With the increase in the T-bill yield, the cut-off yield of 3.04% in the latest auction would be above the best fixed deposit rates in Singapore.

It would also be above 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.

To find out how you can earn a yield of above 3.04%, you can check out the best places to park your savings here.

If you are interested in applying for the T-bill, the next 6-month T-bill auction will be on 13 Feb. 

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

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