Here’s what to expect for the T-bill auction on 15 Aug

What happened?

The next 6-month Singapore T-bill auction (BS24116E) will be coming up on 15 August 2024.

I have seen questions in the Beansprout community on whether there will be a further decline in the Singapore T-bill yield, after the cut-off yield for the previous 6-month T-bill fell sharply to 3.4%.

In addition, we have seen much volatility in global financial markets in recent weeks with rising fears of a recession in the US.

Let us look at the latest indicators to find out if it might still be worthwhile applying for the T-bill

Don't miss out on the next T-bill

Sign up to receive a free email reminder when the next Singapore T-bill auction is open.

Subscription preferences

• Reminder for Tbill

Will the T-bill yield fall further in the auction on 15 Aug?

#1 - US government bond yields have fallen sharply

US government bond yields have declined sharply in recent weeks, after weak employment data led to rising fears about a recession.

There are also rising expectations that the Fed will cut interest rates more aggressively, with the some investors now forecasting that the Fed may cut interest rates by 0.5% in the upcoming September meeting. 

As a result, the US 10-year government bond yield has fallen to a low of about 3.8% from a recent high of above 4.45% at the start of July. 

However, the yield has since rebounded slightly to reach 3.95%, after the latest economic data showed that there are still some bright spots in the US economy. That is still sharply lower than where it was two weeks ago. 

Likewise, the US 2-year government bond yield has fallen to about 4.05% from about 4.4% in late August, albeit also recovering from its recent low. 

#2 – Singapore government bond yields have fallen too 

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

The Singapore 10-year government bond yield has declined to 2.86% from a recent high of 3.1% in the middle of July. 

Likewise, the closing yield on the 6-month T-bill has fallen to 3.35% on 8 August, below the cut-off yield of 3.4% in the previous T-bill auction on 1 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 3.60% in the auction on 6^th August, lower than the cut-off yield of 3.72% in the auction on 30th July. 

#3 – Slightly larger issuance size compared to the previous auction

The issuance size of the upcoming 6-month Singapore T-bill will increase slightly to $6.9 billion from S$6.8 billion in the previous auction. 

In the T-bill auction on 1 Aug, we saw a surge in T-bill applications to a record high of level of S$18.0 billion.

It is uncertain how will demand for the T-bill change with the recent decline in T-bill yield. Should applications for the T-bill fall sharply, we may see the cut-off yield for the T-bill yield being supported. 

What would Beansprout do?

Singapore T-bill yields and US government bond yields have fallen sharply in recent weeks with rising fears about a US recession. 

As such, the closing yield on the 6-month Singapore T-bill has fallen to 3.35% at of 26 July 2024.

For CPF investors, it may still be worthwhile applying for the T-bill due to the potentially higher interest earned. 

To calculate how much more interest you can potentially earn by investing in the T-bill using your CPF OA savings, check out our CPF-T-bill calculator. 

For cash investors, the closing yield on 6-month Singapore T-bill has now fallen below the best 6-month fixed deposit rate of 3.4% p.a.

As such, I would also explore other ways to earn a higher yield on my cash with our guide to Where to park your cash for high yield? T-bills vs Fixed Deposit vs SSB.

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 it is uncertain if there will be a fall in demand with the recent fall in T-bill yield. At the same time, global bond yields and global financial markets 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 Thursday, 15 Aug 2024.  We would need to put in our cash applications for the T-bill by 9pm on 14 Aug (Wed).

Don't miss out on the next T-bill

Sign up to receive a free email reminder when the next Singapore T-bill auction is open.

Subscription preferences

• Reminder for Tbill

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 14 Aug (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 14 Aug (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 13 Aug (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.

Join our Beansprout Telegram group for the latest insights on Singapore stocks, REITs, bonds and ETFs.