T-bill latest yield at 4.2% p.a. Here's why the yield is slightly lower.

What happened?

Many investors were looking out for the first 6-month T-bill auction of 2023 to identify any changes in demand as Singaporeans return from their year-end holidays. 

The cut-off yield for the T-bill auction on 5th January was at 4.2% p.a., slightly lower than the yield in the previous auction on 21 December of 4.28% p.a. 

This was despite a slight increase in global interest rates over the past two weeks. 

There were no major surprises in the latest T-bill auction, but we thought it is interesting that there has been a shift from making non-competitive to competitive bids. 

Let’s take a look at these trends in more detail. 

What we learnt from the latest T-bill auction

#1 - Demand for T-bill remains high

The total amount of subscriptions rose slightly to $12.0 billion from $11.8 billion in the previous auction. 

Apart from the auction on 8 December, 3 of the 4 previous auctions had total subscriptions at about $12 billion each. 

The demand for T-bills has remained strong as the yields have stabilized at above 4% in the past few auctions. 

#2 - Non-competitive bids receive full allocation 

Once again, investors who put in non-competitive bids were able to get full allocation for the T-bill subscriptions.

There were $1.4 billion of non-competitive bids submitted this time, below the $1.88 billion of maximum allocation for non-competitive bids. 

However, what is interesting to note is that the amount of non-competitive bids has fallen from $1.6 billion in the previous auction.

#3 – More are making competitive bids

There is a greater proportion of investors putting in competitive bids, which increased to $10.6 billion from $10.2 billion in the previous auction. 

This might be because investors want to make sure that they are getting a minimum yield on their T-bill subscriptions, especially as there might be other products also offering decent interest rates.

However, the yields that investors are making competitive bids have remained the same. 

The average yield for competitive bids was at 3.77% p.a., almost similar the previous auction’s 3.76% p.a.

The median yield for competitive bids was at 4.0% p.a., exactly what it was at the previous auction too. 

What would Beansprout do?

In summary, there were no major shifts in the first T-bill auction of 2023.  

The total demand and the yield of competitive bids submitted were quite similar to what we saw in the previous auction. 

However, there was less non-competitive bids and more competitive bids, which led to a slightly lower cut-off yield. 

For those who were allocated the T-bill, the issue date will be on 10th January. 

If you missed out on the T-bill auction this time, the next 6-month T-bill auction will be on 18 January 2023. 

There will also be a 1-year T-bill auction on 26 January 2023. 

Alternatively, you can also get an almost similar yield with the best fixed deposit rate of 4.15% interest rate for a 1 year deposit of S$10,000.