T-bill yield steady at 3.74%. Here’s why it has remained high

What happened?

Many investors were eagerly awaiting the result of the first Singapore T-bill auction in 2024.

The cut-off yield for the 6-month Singapore T-bill (BS24100F) was at 3.74%, little changed from the yield of 3.73% in the previous auction.

This may come as a surprise to many, as US government bond yields have fallen sharply in recent weeks.

Let us find out why the Singapore T-bill yield has remained high.

What we learnt from the latest Singapore T-bill auction

#1 – Demand for Singapore T-bill remains strong

The total amount of T-bill applications was at S$12.8 billion, unchanged from the previous auction.

The amount of non-competitive bids rose to S$2.4 billion from S$2.2 billion in the previous auction.

Eligible non-competitive bids were able to get 100% allocation in the latest T-bill auction, as the amount of non-competitive bids was within the allocation limit.

The amount of competitive bids fell slightly to S$10.4 billion from S$10.6 billion in the previous auction.

Demand for the T-bill has remained at a higher level compared to the third quarter of 2023.

#2 – Lower median yield of bids submitted

The median yield of bids submitted fell slightly to 3.55% from 3.58% in the previous auction, and 3.6% in the auction on 7 December.

This would be inline with the decline in global bond yields in recent weeks, after the Fed indicated that there might be interest rate cuts in 2024. 

However, the average yield of bids submitted rose to 3.06% from 2.94% in the previous auction, and would be similar to levels in the auction on 7 December. 

#3 – Higher issuance size may have supported yield

Despite the strong demand for the T-bill and lower median yield of bids submitted, the cut-off yield was supported by the larger T-bill issuance size.

The amount of T-bills issued rose to S$6.1 billion from S$5.6 billion in the previous auction. 

As we shared earlier, this would mark the largest 6-month T-bill issuance size over the past year. 

What would Beansprout do?

The elevated Singapore T-bill yield may be good news to investors, especially as some banks have reduced their fixed deposit rates. 

For now, the latest 6-month T-bill yield of 3.74% remains above the best six month fixed deposit rate of 3.65%.

Hence, we continue to like the T-bill as 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 18 January 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. 

If you would like to secure the high yields over a longer time period, then it might be worth considering Singapore Savings Bonds (SSBs), where the current issuance offers a 10-year average return of 2.81% per year. 

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

Learn more about investment opportunities in 2024

Sign up for the FSM Invest Expo 2024 and get a headstart on your investing journey in the new year. Register for free now and stand a chance to win more than S$20,000 worth of lucky draw prizes and sure win prizes throughout the day!