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Will the T-bill yield rise with a spike in issuance size?

13 Jan 2024

The yield on the upcoming 6-month Singapore T-bill may be supported by a significantly larger issuance size.

6 month singapore t-bill auction 18 jan 2024

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What happened?

The next 6-month Singapore T-bill auction (BS24101Z) will be held on 18 January 2024.

Many Singapore T-bill investors are wondering if the T-bill yield will remain high.

This comes as some banks have started to cut their fixed deposit rates and savings account interest rates.

As a recap, the cut-off yield for the 6-month Singapore T-bill in the previous auction on 4 January was steady at 3.74%. 

Let’s find out what the latest indicators are telling us about the potential yield for the T-bill auction, and if it is worthwhile applying for the T-bill.

6-month singapore t-bill auction 18 jan 2024
Source: MAS

Will the Singapore T-bill yield rise with a spike in issuance size?

#1 – Rebound in US government bond yields short-lived

US government bond yields bounced slightly as we entered 2024, reversing some of the sharp decline we saw since November last year.

This came after minutes from the Federal Reserve’s December meeting indicated that the Fed might keep the interest rate at the current level longer than is anticipated.  

At one point, the US 10-year government bond yield climbed to above 4% once again. 

However, the bounce in bond yields proved to be short-lived, as the US 10-year government bond yield has fallen to below 4% once again. 

As of 12 January 2024,  the US 10-year government bond yield is at 3.93%, close to where it was at the end of 2023.  

US 10-year government bond yield 13 jan 2024
Source: Tradingview 

#2 – Singapore T-bill closing yield has been stable 

Closer to home, Singapore government bond yields have been fairly stable in the past week.

The closing yield on the 10-year Singapore government bond was at 2.81% on 12 January, unchanged from 5 January.

The closing yield on the 6-month Singapore T-bill was at 3.75% on 12 January, similarly unchanged from 5 January. 

6-month singapore t-bill closing yield 18 jan 2024
Source: MAS

Some investors may also be tracking the 3-month MAS note closely to get an indication of shorter maturity Singapore government bonds. 

The cut-off yield on the 3-month MAS note was at 4.04% on 9 January, also relatively unchanged from the cut-off yield of 4.05% on 3 January. 

3-month singapore t-bill yield jan 2024
Source: MAS

#3 – Significantly larger issuance size may also support Singapore T-bill yield 

One thing that caught our eye for the upcoming 6-month Singapore T-bill auction is the significantly larger issuance size of S$6.4 billion.

6-month singapore t-bill auction size 18 jan 2024
Source: MAS

 

In the previous 6-month Singapore T-bill auction on 4 January, the issuance size was at S$6.1 billion.

Looking back to the 6-month Singapore T-bill auction one year ago on 18 January 2023, the issuance size was just S$5.0 billion. 

A larger amount of T-bills on auction has helped to drive a higher cut-off yield in auctions in the past.

For example, the cut-off yield rose to 3.80% when the amount of T-bills issued rose to $6.0 billion in the auction on 23 November from S$5.7 billion in the previous auction. 

What would Beansprout do?

The 6-month Singapore T-bill yield has remained steady, even as US government bond yields have weakened significantly over the past month.

Also, T-bill cut-off yield may be supported by the significantly larger amount of T-bills to be issued in the upcoming auction, if demand does not rise sharply as well. 

Looking at the latest indicators, the closing yield on 6-month Singapore T-bill of 3.75% is higher than the best 6-month fixed deposit rate of 3.65%.

As such, we believe the T-bill remains a safe way to earn a higher return on our savings in the short term.

For CPF applications, check out our CPF T-bill calculator to find out how much more interest you can potentially earn by investing in the T-bill.

The auction will be held on Thursday, 18 January 2024. This means that we would need to put in our cash applications for the T-bill by 9pm on 17 January (Wed).

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

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 and Facebook group for the latest insights on Singapore stocks, REITs, bonds and ETFs. 

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