Will the T-bill yield rise further in the auction on 2 Jan 2025?

What happened?

Applications for the first T-bill auction of 2025 have opened.

The next 6-month Singapore T-bill auction (BS25100E) will be on 2 January 2025.

While 2024 has yet to come to an end, I have already seen questions in the Beansprout community on the expected yield for the upcoming T-bill auction. 

In the previous 6-month T-bill auction, the cut-off yield rebounded slightly to 3.02%. 

However, we have seen the US Federal Reserve cutting its interest rate recently. 

In this post, I will be looking at the latest indicators to find out if it might still be worthwhile applying for the upcoming Singapore T-bill.

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Will the Singapore T-bill yield stay above 3% in the auction on 2 January?

#1 – US bond yields have bounced

The US government bond yield has stayed elevated in the past few weeks. 

This is despite the cut in interest rates by the US Federal Reserve by another 0.25% (25 basis points).

The 10-year US government bond yield has risen to close to 4.6% from below 4.2% in early December. 

This is driven by continued strength in the US economy, as well as the US Fed’s projections for slower rate cuts in 2025.   

However, we have not seen as significant a bounce in yields for bonds with shorter maturities. 

The 1-year US government bond yield has stayed at around the 4.2% to 4.3% level in the past two weeks. 

#2 – Closing yield on 6-month Singapore T-bill has been stable

Despite the bounce in US government bond yields, Singapore government bond yields have not risen as much. 

The Singapore 10-year government bond yield is at 2.74%, unchanged from where it was two weeks ago.

The closing yield on the 6-month T-bill was 3.01% on 24 December, close to the cut-off yield of 3.02% in the previous T-bill auction on 19 December.

The yield on the 3-month MAS bill can also give an indication of the yields for shorter-maturity Singapore government bonds.

The cut-off yield was at 3.19% in the auction on 24 December, similar to the cut-off yield of 3.19% in the auction on 17 December.  

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

The issuance size of the upcoming 6-month Singapore T-bill is $6.9 billion, slightly higher than S$6.8 billion in the previous auction. 

We saw a decline in the amount of T-bill applications to S$15.8 billion in the auction on 19 December from S$17.4 billion in the auction on 5 December. 

If demand for the T-bill continues to decline, the larger issuance size of the upcoming T-bill may help to support the T-bill yield. 

What would Beansprout do? 

Singapore government bond yields have remained stable, despite the bounce in US government bond yields in recent weeks. 

The closing yield on the 6-month Singapore T-bill was at 3.01% on 24 December, close to the cut-off yield in the previous auction.

Although the closing yield of the 6-month T-bill is now at 3%, we would still consider other places to park our cash to earn a higher yield.

For example, the best 6-month fixed deposit rate of 3.20% p.a. is above the closing yield on the 6-month Singapore T-bill for cash investors with more than S$100,000. 

For CPF investors, the closing yield is also slightly above the breakeven cut-off yield for CPF-OA funds. 

You can find out how much more interest you can potentially earn on the Singapore T-bill using our CPF-T-bill calculator.

The 6-month Singapore auction will be held on 2 January.  

However, as it is a public holiday on 1 January, we would need to put in our cash applications for the T-bills by 9 pm on 31 December (Tuesday).

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Applications for the T-bills 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 31 Dec (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 31 Dec (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 30 Dec (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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