Will the T-bill yield bounce in the auction on 10 Oct?

What happened

The next 6-month Singapore T-bill auction (BS24120V) will be coming up on 10 October 2024.

After the cut-off yield for the previous 6 month T-bill dived to 2.97%, there appears to be less discussion on the T-bill in the Beansprout community recently. 

However, I noticed that there has been a slight bounce in US government bond yields in the past week. 

As such, I decided to find out if we might also see a rebound in the Singapore T-bill yield, and if it might still be worthwhile applying for the T-bill. 

Will the T-bill yield bounce in the auction on 10 October?

#1 – US bond yields have rebounded slightly 

The US government bond yield has rebounded slightly in recent weeks, after falling sharply in the wake of the Federal Reserve interest rate cuts. 

The 10-year US government bond yield has bounced to 3.86% from a low of about 3.6% in mid September.

This was driven by stronger than expected US economic data, which led investors to moderate their expectations of further sharp interest rate cuts.

While the 1-year US government bond yield has also rebounded slightly to above 4%, the increase has not been as significant as the rise in the 10-year US government bond yield. 

#2 – Singapore government bond yields have bounced too

With the rebound in US government bond yields, Singapore government bond yields have bounced too. 

We have seen a stronger rebound in the yield for longer maturity Singapore government bonds compared to shorter maturity ones. 

The Singapore 10-year government bond yield has increased to 2.76% from a low of 2.41% in the middle of September. 

The closing yield on the 6-month T-bill was 3% on 4 October, increasing slightly from  the cut-off yield of 2.97% in the previous T-bill auction on 26 September.

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 3.29% in the auction on 1 October, higher than the cut-off yield of 3.17% in the auction on 27 September. 

#3 Same issuance size as the previous auction

The issuance size of the upcoming 6-month Singapore T-bill remains at $6.8 billion, unchanged from the previous auction. 

We saw an increase in the amount of T-bill applications to S$13.9 billion in the auction on 26 September from S$13.4 billion in the auction on 12 September. 

However, if demand for the T-bill were to fall sharply, we might see further support to the cut-off yield for the T-bill. 

What would Beansprout do? 

We have seen some stabilisation in the Singapore T-bill yield following the sharp decline in previous months.

The closing yield on the 6-month Singapore T-bill was at 3% on 4 October, slightly above the cut-off yield of 2.97% in the previous auction. 

For cash investors, the closing yield on 6-month Singapore T-bill is now slightly below the best 6-month fixed deposit rate of 3.% p.a.

For CPF investors, the closing yield is still slightly above the breakeven cut-off yield for CPF-OA funds. 

You can find out how much more interest you can potentially earn on the Singapore T-bill using our CPF-T-bill calculator.

It is also worth noting that the cut-off yield for the T-bill auction will eventually depend on the applications that are submitted, and global bond yields remain volatile.

With the volatility, we can also consider making a competitive bid for the T-bill to make sure that we do not end up with a lower than expected yield.

To earn a higher yield compared to the T-bill, we would also consider other places to park our cash.

The 6-month Singapore auction will be held on 10 Oct.  We would need to put in our cash applications for the T-bills by 9pm on 9 Oct (Wed).

Applications for the T-bills 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 9 Oct (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 9 Oct (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 8 Oct (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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