T-bill yield steady at 1.44% as demand rebounds

What happened?

After the recent bounce in the T-bill yield, it appears that there is more attention on the Singapore T-bill auction once again.

In the latest auction on 9 October, the cut off yield for the 6-month Singapore T-bill (BS25120N) remained steady at 1.44%, unchanged from the previous auction.

Earlier, I shared that the T-bill yields stabilised as US and Singapore government bond yields seem to have found some support in the past week.

For investors still looking at Singapore T-bills as a place to generate passive income. I'll share how it compares to the best fixed deposit rates as a place to park your spare cash. 

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

#1 - Demand for the Singapore T-bill bounced

Total applications for the 6-month Singapore T-bill increased to S$14.8 billion in the latest auction on 9 October from S$13.5 billion on 25 September. 

The increase in applications is likely due to the recent yield rebound, driving higher investor demand.

The amount of competitive bids increased to S$13.6 billion. 

If you placed a competitive bid below 1.44%, you would receive 100% of your requested T-bill allocation.

If you bid at exactly 1.44%, the allocation would be around 74%.  

The amount of non-competitive bids increased to S$1.2 billion. 

Since the amount of non-competitive bids was within the allocation limit, all eligible non-competitive bids received full allocation for the T-bill. 

#2 - T-bills issued increased 

The amount of T-bills issued was at $7.8 billion, which was slightly higher than the previous auction on 25 September at $7.7 billion. 

With the higher amount of T-bill applications, the ratio of applications to T-bills issued (bid-to-cover ratio) increased to 1.9x. 

#3 - Median yield of bids submitted rose slightly

The median yield of bids submitted rose slightly to 1.38% from 1.33% in the previous auction. 

The average yield of bids submitted increased to 1.29% from 1.23% in the previous auction.

The increase in the median and average yields of bids submitted would be consistent with the slightly bounce in bond yields we have seen in the past two weeks.

Given the median yield and the cut-off yield, this suggests that a substantial number of bids were placed in the 1.38% to 1.44% range, on par with the best 6-month fixed deposit rate in Singapore. 

What would Beansprout do?  

Despite the increase in demand for T-bills, the cut-off yield has remained steady at 1.44% due to the higher yields of bids submitted.

This likely reflects the bounce in government bond yields we have seen in recent weeks.

The latest cut-off yield for the Singapore T-bill is now close to the best 6-month fixed deposit rate in Singapore of 1.40% p.a.  

It would also be quite close to the 1-year return of 1.39% on the latest Singapore Savings Bonds (SSBs).

However, we were still able to find savings accounts in Singapore that offer an interest rate of above 1.44% p.a. For example, the DBS Multiplier promo allows new Multiplier customers to earn up to 2.5% p.a. on the first S$100,000. 

To find out other ways to make your savings work hard, check out our guide to best ways to earn a passive income in Singapore.

[Beansprout Exclusive Longbridge Promotion] Get bonus S$50 FairPrice voucher, S$18 cash voucher, plus 2x6% p.a. interest boost on S$2,000 with Longbridge Cash Plus for 90 days (worth up to S$60) when you sign up for a Longbridge account via Beansprout and fund S$2,000. T&Cs apply. Learn more about the Longbridge promotion here. 

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