Will the T-bill yield rise above 3.8% in the auction on 11 April?

What happened?

I’m seeing more investors in the Beansprout community talking about the Singapore T-bill recently.

This might be because the yield on the T-bill has stayed high, with the cut-off yield reaching 3.8% in the previous auction.

The elevated T-bill yield stands in contrast to the cut in fixed deposit rates and savings account interest rates we have seen in recent weeks.

Like many others, I was wondering if the yield in the upcoming Singapore T-bill auction (BS24107N) on 11 April 2024 will remain elevated. 

Here’s what I learnt about what to expect in the upcoming 6-month Singapore T-bill auction by looking at the latest indicators.

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Will the Singapore T-bill yield rise further? 

Firstly, I was surprised to see that US government bond yields have risen once again in recent weeks.

The 10-year US government bond yield has climbed to 4.33%, the highest level since November last year. 

This is likely due to renewed worries that persistent inflation may limit the ability of the US Federal Reserve to cut interest rates aggressively. 

After all, we have seen Brent crude oil prices rising to above $90 per barrel once again with rising geopolitical concerns. 

The US 2-year government bond yield has also climbed to 4.66%, close to its recent highs. 

#2 – Singapore government bond yields have risen by a smaller extent 

Closer to home, the Singapore government bond yields have likewise risen in recent weeks.

This is most evident in the 10-year Singapore government bond yield, which jumped to 3.21% on 5 April from just 3.10% on 1 April.

The 6-month T-bill yield has remained relatively steady at 3.75%, close to the cut-off yield in the previous auction. 

Likewise, the cut-off yield on the 3-month MAS bill has been stable at 3.93% in the auction on 2^nd April, close to the yield of 3.94% in the auction on 19^th March. 

#3 – Demand likely to increase further compared to previous auction

One thing I will be looking out closely for is whether there will be a sharp increase in demand in the upcoming T-bill auction on 11^th April.

In the previous auction on 27^th March, we have already seen a spike in applications to reach a record high of S$15.6 billion.

This was despite likely lower demand by CPF members due to the loss of an additional 2 months of CPF interest in the auction. 

An increase in applications using CPF OA could lead to even higher demand in the upcoming T-bill auction.

In addition, we have seen fixed deposit rates being cut in recent weeks, with the best 6-month fixed deposit rate recently cut to 3.25% from 3.35% previously. 

The higher cut-off yield of 3.8% offered in the previous T-bill auction may hence divert investors from fixed deposits towards the T-bill.

What would Beansprout do?

The closing yield on the 6-month Singapore T-bill has remained stable at 3.75% despite the spike in US government bond yields in recent weeks. 

However, I will be watchful of whether there will be a sharp increase in demand for the T-bill, which may then bring down the cut-off yield in the upcoming auction.

This is especially so with the cut in fixed deposit rates in recent weeks. 

One of the ways we can ensure that we do not end buying the T-bill with a lower than expected yield is to put in a competitive bid. 

As a recap, we will only invest in the T-bill if the yield is above a certain level when we submit a competitive bid. 

To find out what is a competitive bid and how to make a competitive T-bill bid, check out our guide here.

I will also make sure that I submit my T-bill bid early this time.

The auction will be held on Thursday, 11 April 2024.

However, as Wednesday, 10 April 2024 is a public holiday in Singapore, we will need to submit both our cash and CPF applications earlier than usual.

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As cash applications for the T-bill close one business day before the auction date, we would need to put in our cash applications for the T-bill by 9pm on 9 April (Tuesday).

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 9 April (Tue). 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 April (Tue). 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 April (Mon) 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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