Latest T-bill yield at 3.84% as non-competitive bids rise. Here’s why it matters

What happened?

The cut-off yield for the latest 6-month T-bill auction on 8 Jun 2023 was at 3.84% p.a. This is quite similar to the yield of 3.85% p.a. in the previous auction. 

Even as the headline yield has not changed much, it was interesting to see that the amount of non-competitive bids rose sharply in the latest auction.

Let’s take a look to understand what this could mean for the upcoming T-bill auction.

What we learnt from the latest T-bill auction

#1 – Increase in non-competitive bids for the 6-month T-bill despite fall in overall demand

The total amount of applications for the latest T-bill was at S$11.5 billion, falling from S$12.2 billion in the previous auction. 

The decline in demand was seen largely for competitive bids, which fell to S$9.6 billion from S$10.8 billion in the previous auction.

Surprisingly, the amount of non-competitive bids continued to rise, reaching $1.9 billion from S$1.4 billion in the previous auction.

This would represent the highest amount of non-competitive bids since November last year, when total non-competitive bids reached S$2.5 billion in the auction on 24th November.

For investors who might not be aware, non-competitive bids will only receive pro-rata allotment of T-bills if non-competitive applications exceed 40% of amount offered.

In this case, there will be a maximum of S$2.1 billion of allocation to non-competitive bids based on the issue size of S$5.2 billion. 

As the amount of non-competitive bids of S$1.9 billion was still below the allocation limit, all non-competitive bids were able to get their full allocation. 

#2 - Average and median yield of bids submitted rose

The average and median yields of bids submitted rose with the lower amount of competitive bids submitted. 

The median yield rose to 3.68% p.a. from 3.60% p.a. in the previous auction.

The average yield rose to 3.36% p.a. from 3.15% p.a. in the previous auction.

This would mean that investors who applied were generally expecting a higher yield on their investments compared to the previous auction. 

What would Beansprout do?

While the cut-off yield of the latest T-bill auction is little changed from the previous auction, it was interesting to note the sharp increase in non-competitive bids.

If the amount of non-competitive bids continue to increase and exceed 40% of the T-bill issuance, investors who put in a non-competitive bids may not be able to get full allocation of their applications in future auctions. 

Learn more about what are competitive bids and how to make a competitive bid using our guide.

With the yield on the 6-month T-bill remaining relatively unchanged at 3.84% p.a., the T-bill continues to offer a higher interest rate compared to the best fixed deposit rate currently. 

If you missed out on the current T-bill auction, you can consider parking your savings in various cash management accounts or savings accounts while waiting for the next 6-month T-bill auction, which will be held on 22 June 2023. 

For those who are looking to lock in interest rates for a longer period of time, it might also be worth noting that there will be a 1-year T-bill auction coming up on 27 July 2023. 

Check out our CPF-Tbill calculator to find out how much more interest you can potentially earn by investing in the Singapore T-bill using your CPF Ordinary Account (OA) savings.

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