Here’s what to expect for the T-bill auction on 12 Sep

What happened

The next 6-month Singapore T-bill auction (BS24118Z) will be on 12 September 2024.

After the cut-off yield for the previous 6 month T-bill plunged to 3.13%, there appears to have less discussion in the Beansprout community on the Singapore T-bill.

This comes amidst rising hopes of a rate cut by the US Federal Reserve in September. 

However, some investors might still be wondering if it is worthwhile applying for the Singapore T-bill. 

Let us look at the latest indicators to find out what the cut-off yield for the upcoming T-bill auction might be. 

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Will the T-bill yield fall further in the auction on 12 September?

#1 – US bond yields have fallen to 1-year low

US government bond yields have fallen sharply in recent weeks, as investors gained confidence that the US Federal Reserve will start to cut interest rates in September. 

According to the CME Fedwatch Tool, investors are now expecting the Fed to cut interest rates by 1.0% (or 100 basis points) by the end of 2024. 

As a result, the US 10-year government bond yield has fallen to a low of about 3.7%, its lowest level since the middle of last year. 

This would mark a further decline from where it was 2 weeks ago. 

Likewise, the US 1-year government bond yield has fallen to about 4.2% from about 4.4% in late August.

This would also be near its lowest level since the collapse of Silicon Valley Bank in early 2023. 

#2 – Singapore government bond yields have fallen too 

With the fall in US government bond yields, Singapore government bond yields have declined further too. 

The Singapore 10-year government bond yield has declined to 2.6% from a  high of 3.1% in the middle of July. 

Likewise, the closing yield on the 6-month T-bill was 3.12%, on 5 September, similar to the cut-off yield of 3.13% in the previous T-bill auction on 29 August.

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 3.40% in the auction on 3rd September, lower than the cut-off yield of 3.47% in the auction on 27th July. 

#3 Slightly larger issuance size compared to the previous auction

The issuance size of the upcoming will increase slightly to $6.9 billion from S$6.8 billion in the previous auction. 

Despite the fall in T-bill yields, we saw demand for the T-bill remaining elevated at S$16 billion in the auction on 29 August. 

Should demand for the T-bill remain high and the issuance size remaining little changed, there might be further downward pressure in the yield on the T-bill. 

What would Beansprout do? 

Singapore T-bill yields and US government bond yields have fallen sharply in recent weeks with rising expectations of a Fed rate cut. 

From the previous auction on 29^th August, we have seen a further decline in the 3-month MAS note cut-off yield and the 10-year government bond yield. 

Hence, the cut-off yield for the upcoming T-bill auction on 12 September may also fall further from 3.13%.

This would also mean that the yield on the T-bill may be below the best 6-month fixed deposit rate of 3.20% p.a.

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.

The 6-month Singapore auction will be held on 12 Sep.  We would need to put in our cash applications for the T-bill by 9pm on 11 Sep (Wed).

Don't miss out on the next T-bill

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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 11 Sep (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 11 Sep (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 10 Sep (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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