Will the T-bill yield rise above 4% in the upcoming auction on 2 March?



By Beansprout • 25 Feb 2023 • 0 min read

The 6-month Singapore government bond yield has not risen as sharply as US government bond yields in recent weeks.

Singapore T-bill auction 2 March 2023
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What happened?

There’s more anticipation about the upcoming Singapore 6-month T-bill auction, judging from the discussion in the Beansprout Telegram group

This might be because the cut-off yield for the 6-month T-bill rebounded to 3.93% p.a. in the previous auction.

Some of you have asked whether we will see a continued increase in the 6-month T-bill yield, or it might be better to just put our money into fixed deposit.  

Let’s look at some of the recent trends to find out what could be the yield for the upcoming Singapore 6-month T-bill auction (BS23104X) on 2 March 2023.


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Source: MAS


Will the yield on 6-month T-bill rise above 4% p.a?

#1 - US bond yields have been rising sharply

There has been a sharp increase in US government bond yields in recent weeks 

For instance, the yield on the US 6-month government bond has risen to about 5.1% from around 4.8% at the start of the month. 

This was driven by stronger than expected US inflation data, which led investors to predict that the Fed may have to raise interest rates by more than what was previously forecast.  


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Source: Tradingview


#2 - Singapore 6-month bond yields have stayed relatively stable

Despite the surge in bond yields in the US, bond yields in Singapore have stayed relatively stable.

The market yield was at 3.91% as of 24 February, having hovered at around this level over the past week. 

This is also not too different from the cut-off yield on the 6-month T-bill during the auction on 16 February. 


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Source: MAS


Likewise, the yield on the 3-month Singapore government note was at 3.92% during the auction on 21 February, not too different from where it was in the previous week. 


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Source: MAS


#3 - More options for investors to consider for CPF funds

Earlier, we explained how the T-bill auction is conducted and how the cut-off yield is determined by the competitive bids submitted.

To summarise, the cut-off yield at each auction depends on

  • The amount of bids that are made
  • The yields that investors are putting in their competitive bids

Generally, it is quite hard to predict the amount of competitive bids that will be put in each time.

For example, we saw a fall in demand for T-bills in the previous auction after OCBC started offering 3.88% p.a. with a 8-month fixed deposit using CPF Ordinary Account (CPF OA) funds.

This led to a decline in applications for T-bills to S$11 billion from close to S$13 billion in the two previous auctions. 

With the promotion by OCBC still ongoing, some investors may continue to prefer to put their money into fixed deposits compared to T-bills. 

Chart, histogram

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What would Beansprout do? 

From the charts above, it is clear that US government bond yields have risen sharply in recent weeks. 

However, the 6-month Singapore government bond yield has stayed at about the same level as the previous auction. 

It might be worth noting that the eventual cut-off yield for the upcoming T-bill auction will still depend on competitive bids submitted

Some investors may choose to refer to fixed deposit rates to determine the yield that they bid for the T-bill. 

For CPF applications, OCBC has set the benchmark with a 8-month fixed deposit at 3.88% p.a.

If you find it a hassle to wait in the queue to apply for the fixed deposit, we share how you can avoid the queue with this simple method. 

If you’d prefer to apply for the T-bill using your CPF OA funds, we share how you can apply for T-Bills using CPF OA via DBS i-banking.  

For cash applications, we were still able to find a few fixed deposit accounts that offered an interest rate of close to 4.0% over 6 months, 8 months and 12 months, even as some banks have cut their fixed deposit rates in recent weeks. 

Here’s a quick reminder: The auction will be held on 2 March (Thur), which means that we would need to put in our cash applications by 1 March (Wed). 

Applications for T-bill using CPF close earlier, with online applications using CPF-OA ending at noon on 28 Feb (Tue). 

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