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

What happened?

Singapore T-bill investors in the Beansprout community have some reason to rejoice.

The cut-off yield for the latest 6-month Singapore T-bill (BS24104T) jumped to 3.80% from 3.66% in the previous auction.

This would also mark the highest cut-off yield for the Singapore T-bill since the auction in November last year. 

It appears that the Singapore T-bill yield has recovered significantly since reaching a recent low of 3.54%.

Let us find out what is driving the bounce in the yield on the 6-month Singapore T-bill .

What we learnt from the latest Singapore T-bill auction

#1 – Demand for Singapore T-bill fell further

The total amount of applications for the 6-month Singapore T-bill fell to S$12.4 billion from S$13.5 billion in the previous auction.

This would also represent a marked decline from the recent peak of S$14.6 billion in the auction on 1 February.

It would also be the lowest level of T-bill applications since 26 October last year. 

This is likely due to timing of the auction, where some CPF members may be worried about two additional months of CPF interest when applying for the T-bill.

The amount of competitive bids fell to S$10.0 billion from S$11.5 billion in the previous auction.

Surprisingly, the amount of non-competitive bids rose to S$2.4 billion from S$2.0 billion in the previous auction.

As the amount of non-competitive bids was within the allocation limit, eligible non-competitive bids were able to receive full allocation. 

#2 – Median and average yield of bids submitted stable

While the cut-off yield rose sharply compared to the previous auction, the median yield and average yield of bids submitted were fairly stable.

The median yield of bids was at 3.50%, compared to 3.48% in the previous auction.

This would be similar to the best 6-month fixed deposit rate currently. Hence, it would appear that investors are using the fixed deposit rate as an indicator when submitting their bids.

The average yield of bids was at 2.95%, compared to 3.0% in the previous auction.

The stability in the median and average yield of bids submitted is consistent with the closing yield of the 6-month T-bill over the past week, even as US government bond yields have rebounded. 

#3 – Smaller issuance size had little impact on cut-off yield

Earlier, we shared that the amount of T-bills issued in the current auction would be slightly lower than the previous auction. 

However, this did not cause significant downward pressure on the cut-off yield in the auction, as demand fell by an even larger extent. 

What would Beansprout do?

T-bill investors may be pleased to see that the cut-off yield has rebounded to 3.8% in the latest auction.

This appears to be largely driven by the fall in demand for T-bills. 

With the recent bounce, the cut-off yield on the latest 6-month Singapore T-bill is above the best 6-month fixed deposit rate of 3.50% once again.

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 14 March 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 find out how the yield on the T-bill compare with other assets such as FD and SSB, check out our Compare Yield Tool.

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