T-bill yield falls to 3.7%. Here’s what is driving the decline

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Bonds

By Gerald Wong, CFA • 04 Jul 2024 • 0 min read

The cut-off yield on the latest Singapore T-bill auction on 4 July fell to 3.7%.

t-bill singapore result 04 July 2024.jpg
In this article

What happened?

The auction results for the first Singapore 6-month T-bill auction for the second half of the year are out. 

The cut-off yield for the 6-month Singapore T-bill auction (BS24113N) on 4 July fell to 3.7% from 3.74% in the previous auction.

This would represent the second consecutive decline in the cut-off yield for the 6-month Singapore T-bill. 

Thereafter, I saw a discussion in the Beansprout community on the reasons driving the lower yield.

In this post, I will be sharing more about why the cut-off yield for the Singapore T-bill fell. 

6-month singapore t-bill auction result 4 july 2024
Source: MAS

 

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

#1 - Demand for the Singapore T-bill remained strong

The total amount of applications for the 6-month Singapore T-bill rose to S$15.6 billion from S$15.5 billion in the previous auction

The amount of competitive bids fell to S$11.9 billion from S$12.4 billion in the previous auction.

If you had submitted a competitive bid at below 3.7%, you would receive 100% allocation of your T-bill bid amount.

If you had submitted a competitive bid at 3.7%, you would receive approximately 25% of your T-bill bid amount.

The amount of non-competitive bids is S$3.7 billion, higher than S$3.1 billion in the previous auction.

As the amount of non-competitive bids is higher than the allocation limit, eligible non-competitive bids get 70% allocation. 

6 month t-bills application results 4 july 2024

#2 Median yield and average yield were lower 

The median yield of bids was 3.4%, down from 3.54% in the previous auction.

The average yield of bids was 2.81%, well below the 3.08% in the previous auction.

The decline in average yield of bids submitted suggests that investors are prepared to accept lower yields for the T-bill. 

While we shared that the closing yield on the T-bill was stable as of 28 June, we have seen a decline in government bond yields in recent days.

This was partly driven by Fed Chairman Jerome Powell’s comments that the US is back on a “disinflationary path”, driving expectations that there will be more rate cuts. 

Yield and price 6-month T-bill 4 july 2024

#3 Slightly smaller issuance size compared to previous auction

The amount of T-bills issued in the latest auction was S$6.5 billion, down from S$6.6 billion in the previous auction.

As the demand for T-bills has risen slightly, the bid to offer ratio was 2.4x, above the previous auction’s 2.35x.

Together with the lower average yields of bids submitted, the smaller issuance size may have also contributed towards the decline in the cut-off yield. 

What would Beansprout do? 

The decline in the cut-off yield in the latest 6-month T-bill auction appears to be largely driven by a fall in yields of bids submitted.

Despite the fall in cut-off yield, it remains fairly elevated at 3.7%.

This would be above the best 6-month fixed deposit rate of 3.4% p.a., even as some banks have started raising their fixed deposit rates in June. 

Overall, 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.

The next 6-month T-bill auction on 20 June 2024, and you can set a reminder by signing up for our free email alert. 

 

Don't miss out on the next T-bill
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Sign up to receive a free email reminder when the next Singapore T-bill auction is open.

If you did not get your targeted allocation of the T-bill, there are a few other ways to earn a comparable yield for the short term

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. 

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