Will the T-bill yield rise above 3.8% in the auction on 14 March?

What happened?

There seems to be more investors looking at the Singapore T-bill recently. 

After all, the cut-off yield for the T-bill had rebounded to 3.80% in the previous auction.

This led many to ask if we might see the cut-off yield rise further in the upcoming Singapore T-bill auction (BS24105X) on 14 March 2024. 

Let us look at the latest indicators to find out what to expect in the upcoming 6-month Singapore T-bill auction.

Will the T-bill yield rise further in the auction on 14 March?

#1 – US bond yields have declined

US government bond yields have fallen in the past week after rebounding in the month of February.

This came after Fed Chairman Jerome Powell indicated that we are still likely to see rate cuts in 2024.

According to the CME Fedwatch tool, investors are now largely expecting that we might see five rates cuts this year, compared to expectations for four rate cuts a week ago. 

As a result, the 2-year US government bond yield has fallen to around 4.5% from above 4.7% at the end of February.

Likewise, the US 10-year government bond yield has fallen to around 4.1% from around 4.3% at the end of February. 

#2 – Singapore bond yields have fallen too

The yields on longer maturity Singapore government bonds have fallen with the decline in US government bond yields.

The closing yield on the 10-year Singapore government bond fell to 2.99% as of 8 March from 3.11% on 1 March.

However, we have not seen such a sharp decline in the shorter-maturity Singapore government bonds. 

For example, the closing yield on the 6-month Singapore T-bill was at 3.70% as of 8 March, slightly lower than the closing yield on 1 March. 

However, the closing yield is lower than the cut-off yield of 3.8% in the previous T-bill auction on 29 February.

The cut-off yield on the 3-month MAS note has been fairly stable at 3.95% in the auction on 5^th March, unchanged from the previous auction on 27^th February.

#3 – Issuance size lower compared to previous auction

One of the reasons for the higher cut-off yield in the previous auction was due to the sharp fall in demand, as there may be less CPF investors applying.  

However, it is worth noting that the amount of 6-month T-bills to be issued will fall slightly to S$6.3 billion in the upcoming auction from S$6.4 billion in the previous auction

This may mean that if the demand for the T-bill rebounds, there may be downward pressure on the cut-off yield in the auction. 

#4 - Fixed deposit rate has fallen in recent weeks

One other factor that might impact the cut-off yield in the upcoming auction is the further decline in fixed deposit rates in recent weeks.

For example, the best 6-month fixed deposit rate is currently at 3.35%, down from 3.5% in February. 

As some investors may refer to the best fixed deposit rate when applying for the T-bill using cash, this may also translate to a lower average yield of bids submitted.

To find out how the yield on the T-bill compare with other assets such as FD and SSB, check out our Compare Yield Tool. 

What would Beansprout do?

There are several factors that may lead to a lower cut-off yield in the upcoming T-bill auction on 14th March. 

Firstly, Singapore government bond yields have fallen with the decline in US government bond yields. 

Next, fixed deposit rates have also been cut in recent weeks. 

At the same time, the slightly smaller issuance size for the upcoming 6-month T-bill may lead to a lower cut-off yield if demand for the upcoming T-bill were to rebound.

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.

The auction will be held on Thursday, 14 March 2024. This means that we would need to put in our cash applications for the T-bill by 9pm on 13 March (Wed).

The closing date for T-bill applications using CPF-OA differs across the three local banks.

• Applications for T-bills online using CPF OA via DBS close at 9pm on 13 March (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 13 March (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 12 March (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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