Here's what to expect for the T-bill auction on 1 August

What happened?

The next 6-month Singapore T-bill auction (BS24115A) will be coming up on 1 August 2024.

I have seen questions in the Beansprout community on whether there will be a further decline in the Singapore T-bill yield, after the cut-off yield for the recent 1-year T-bill auction fell sharply.

Likewise, the cut-off yield in the previous 6-month Singapore T-bill auction also declined.

Let us look at the latest indicators to find out if it might still be worthwhile applying for the T-bill

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Will the yield on the Singapore T-bill fall further?

#1 – US government bond yields have continued to fall

Firstly, US government bond yields have declined in recent weeks, as investors gained confidence that the Fed will cut interest rates in September. 

This was further supported by the latest data that showed that inflation has continued to moderate. 

As a result, the US 10-year government bond yield has fallen to about 4.2% from a recent high of above 4.45% at the start of the month.

Likewise, the US 2-year government bond yield has fallen to below 4.4% from above 4.7% at the start of the month.

#2 – Singapore government bond yields have fallen too 

WIth the decline in US bond yields, Singapore government bond yields have fallen in recent weeks too.

The closing yield on the 10-year Singapore government bond has fallen to 3.02% on 26 July from 3.07% on 19 July.

Likewise, the closing yield on the 6-month Singapore government yield has fallen to 3.61% as of 26 July.

To get an indication of the yields for shorter-maturity Singapore government bonds, we can also refer to the yield on the 3-month MAS bill.

The cut-off yield was at 3.79% in the auction on 23 July, lower than the cut-off yield of 3.87% in the auction on 9 July. 

#3 – No change in issuance size of the T-bill

The issuance size of the upcoming 6-month Singapore T-bill will be similar to the previous issuance at S$6.8 billion. 

In the T-bill auction on 18th July, we saw that demand for T-bills remained strong with the total amount of T-bill applications remaining at close to a record high level of S$15.7 billion.

Likewise, demand for the 1-year Singapore T-bill also surged in the recent auction on 25^th July.

What would Beansprout do?

Singapore T-bill yields and US government bond yields have declined in recent weeks as investors gain confidence on an impending rate cut by Federal Reserve.

As such, the closing yield on the 6-month Singapore T-bill has fallen to 3.61% at of 26 July 2024.

For CPF investors, it may still be worthwhile applying for the T-bill due to the potentially higher interest earned. 

To calculate how much more interest you can potentially earn by investing in the T-bill using your CPF OA savings, check out our CPF-T-bill calculator. 

For cash investors, the closing yield on 6-month Singapore T-bill remains above the best 6-month fixed deposit rate of 3.4% p.a. for now. 

However, there is a risk that the gap compared to the best fixed deposit rate may continue to narrow.

As such, I would also explore other ways to earn a higher yield on my cash with our guide to Where to park your cash for high yield? T-bills vs Fixed Deposit vs SSB.

The 6-month Singapore auction will be held on Thursday, 1 Aug 2024.  We would need to put in our cash applications for the T-bill by 9pm on 31 July (Wed).

Applications for the T-bill using CPF-OA will close 1-2 business days before the auction date, and the dates differ across the three local banks.

• Applications for T-bills online using CPF OA via DBS close at 9pm on 31 July (Wed). Read our step-by-step guide to applying via DBS. 
• Application for T-bills online using CPF OA via OCBC close at 9pm on 31 July (Wed). Read our step-by-step guide to applying via OCBC
• Applications for T-bills online using CPF OA via UOB close at 9pm on 30 July (Tue) Read our step-by-step guide to applying via UOB. 

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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