Will the yield on the 6-month T-bill rise above 4.19% p.a. in the upcoming auction on 10 Nov?

By Beansprout • 08 Nov 2022 • 0 min read

As interest rates increase, the yield on the 6-month bond yield could rise above 4.19% in the upcoming auction. However, there might be an allotment cap to non-competitive bids with soaring demand.

T-bill auction 10 Nov

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What happened?

We’ve been getting many questions from the Beansprout community on what the yield for the upcoming 6-month T-bill auction on 10 November (BS22122Z) will be. 

Interest on the T-bill has soared after the cut-off yield on the 6-month T-bill reached 4.19% in the last auction on 27 October.

However, one of the drawbacks of the T-bill is that we will not know the interest rate at the point of application.

This has deterred many investors from applying for the T-bills, as they’d prefer the certainty of knowing the interest rates that comes with investing in Singapore Savings Bond or putting money into fixed deposit.

Hence, we will take a look at a few datapoints to see if we can pick up some indication.


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Will the yield on the 6-month T-bill rise above 4.19% p.a.?

#1 – Global bond yields continue to rise

The US Federal Reserve recently raised its benchmark interest rates by 0.75 percentage point (0.75%). 

At the same time, the Fed had indicated that interest rates might peak at a higher level than previously expected. 

This has caused a further increase in bond yields in recent weeks. 

For example, the US government 1-year bond yield has climbed to 4.78% as of 8 November from 4.49% as of 27 October.

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Source: Tradingview

#2 – 6-month T-bill now trading at a yield of close to 4%

We can also look at the current yield of 6-month T-bills in the market. 

Based on data from the MAS, the yield on the 6-month T-bill BS22121F maturating on 2 May 2023 is 3.98% as of 8 November 2022. 

This is about 0.32 percentage points (0.32%) higher than where it was on 21 October. 

One thing we’ve noticed is that the cut-off yield on the T-bill auctions is typically higher than the market yield at the time of the auction.

For example, in the auction on 13 October, the cut-off yield on the 6-month T-bill was at 3.77%. This was higher than the closing yield on 12 October of 3.33%, and closing yield on 13 October of 3.59%. 

If this trend were to continue, then the cut-off yield of the upcoming T-bill auction could be above the closing yield of 3.98% on 8 November. 


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Source: MAS

#3 – Recent auction for MAS 3-month note was at 4.6% p.a. cut-off yield

The other thing we can check is the latest auction results on the MAS 3-month note.  

In case you’ve not heard of the 3-month note, that’s because it is not available to retail investors. Only institutional investors can participate in the auction on the 3-month note currently. 

The latest cut-off yield on the MAS 3-month note was at 4.6% p.a., rising further from 4.25% on 18 October. 


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What would Beansprout do? 

By looking at the various data above, there’s some evidence to suggest that bond yields have gone up further from where they were 2 weeks ago when the cut-off yield reached 4.19%. 

However, there is no certainty on the interest rates prior to the auction, as the eventual cut-off yield will still depend on the demand and supply of T-bills in each auction.

For many of Beansprout’s regular readers who are used to putting in non-competitive bids, we’d like to offer a reminder again that if the amount of non-competitive bids exceeds 40%, the bond will be allocated on a pro-rated basis. 

What this means is that based on the issuance size of S$4.5 billion, non-competitive bids will be allotted first up to S$1.8 billion of T-bill, based on 40% of total issuance amount. 

The amount of non-competitive bids already hit S$1.8 billion in the last auction on 27 October, and there might be more investor demand after the interest rate exceeded 4% in the last auction. 

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If being able to get a full allocation is important to you, one of the ways to overcome the allotment limit for non-competitive bids is to put a competitive bid. 

When you submit a competitive bid, you will invest in the bond only if it yields above a certain level. You can indicate the yield you are willing to accept in percentage terms, up to 2 decimal places. 

However, do note that if your competitive bid is similar or higher than the cut-off yield, you may still not get the full amount that you applied for. 

Pro Tip: A lower yield represents a more competitive bid, as you are indicating that you will accept a lower interest rate. You can submit multiple competitive bids.

You can find out more about competitive vs non-competitive bids in our T-bill FAQ.

If you still do not like the uncertainty of not knowing the interest rate on the T-bill auction in advance, one potential strategy is to build a T-bill ladder to reduce your exposure fluctuating interest rates.

You can also ask us your burning question on T-bills in our Telegram group.  

Get latest bond-related news and insights with Bondsupermart.

Aside from new bond issues and credit updates, Bondsupermart hosts an educational podcast, Yield Hunters, to discuss market trends and themes in the fixed income space. Don't miss out on Beansprout’s appearance on their episode on SSB and SGS bonds!


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