T-bill yield rebounds to 3.76%. What’s driving the bounce?

What happened?

I was quite surprised to see the result of the latest 6-month T-bill auction.

The cut-off yield for the 6-month Singapore T-bill auction on 6 June (BS24111X) rose to 3.76% from 3.65% in the previous auction.

This represents the first increase in the T-bill yield after consecutive declines in recent weeks. 

Like many in the Beansprout community, I was curious to find out what is driving the bounce in the T-bill yield. 

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

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

#1 - Demand for Singapore T-bill fell

The total amount of applications for the 6-month Singapore T-bill fell to S$14.2 billion from S$14.5 billion in the previous auction. 

This is the second consecutive decline in applications for the 6-month T-bill.

The amount of competitive bids fell to S$11.1 billion, down from S$11.8 billion in the previous round.

If you had submitted a competitive bid at 3.75% or below, you would receive 100% allocation of your T-bill bid amount.

If you had submitted a competitive bid at 3.76%, you would receive approximately 25% of your T-bill bid amount.

The amount of non-competitive bids is S$3.1 billion, higher than S$2.7 billion in the previous auction.

As the amount of non-competitive bids is higher than the allocation limit, eligible non-competitive bids get 91% allocation. 

#2 Average and median yield of bids rose 

The median yield of bids was at 3.5%, above the 3.48% in the previous auction.

The average yield of bids was at 3.15%, a gain from 3.04% in the previous auction.

The increase in median yield and average yield of bids submitted is consistent with the rise in US government bond yields in recent weeks. 

This comes as Fed officials have indicated that they remain worried about inflation and lacked the confidence to go ahead with rate cuts. 

#3 - Larger amount of T-bills issued

The amount of T-bills issued in the latest auction rose to S$7.1 billion, from S$7.0 billion in the previous auction.

With the fall in demand and increase in T-bills issued, the amount of applications is 2.0x the T-bill issued. 

This represents a decline from 2.07x in the previous auction. 

What would Beansprout do? 

The increase in cut-off yield for the latest 6-month Singapore T-bill is driven by higher yields for bids submitted, falling demand, as well as an increase in T-bills issued.

The higher yields would be consistent with the rise in US government bond yields in recent weeks. 

With the bounce in T-bill yield, the T-bill now offers a higher yield compared to the best 6-month fixed deposit rate of 3.35%.

It is also higher than the best 3-month fixed deposit rate of 3.5%, even as we have seen some banks raising their fixed deposit rates in June. 

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 did not get your targeted allocation of the T-bill, there are a few other ways to earn a similar or higher yield on your savings compared to the latest cut-off yield of 3.76%.

• Syfe Cash+ Guaranteed offers a guaranteed return of 3.75% p.a. for a 6-month term. Learn more here.
• Moomoo Cash Plus offers a guaranteed return of 6.8% p.a. for up to 30 days for new users. Learn more here.

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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If you are new to investing in the T-bill, check out our comprehensive guide to Singapore T-bills to learn more.

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