Will the T-bill yield rise above 3.76% in the auction on 20 June?

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By Gerald Wong, CFA • 15 Jun 2024 • 0 min read

The closing yield on the 6-month Singapore T-bill has fallen to 3.71% with a decline in US government bond yields.

singapore t-bill auction 20 june 2024.jpg
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What happened?

Many investors have been eyeing the Singapore T-bill.

After all, the yield on the Singapore T-bill rebounded to 3.76% in the previous auction, representing the highest level in two months.

This led to questions in the Beansprout community on whether we might see a further bounce in the yield in the Singapore T-bill auction (BS24112W) on 20 June.

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

6-month singapore t-bill auction 20 june 2024
Source: MAS

 

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Will the Singapore T-bill yield rise above 3.76% in the auction on 20 June?

#1 – US government bond yields have fallen

Firstly, I noticed that US government bond yields have declined in the past week.

This was driven by signs that inflation may be easing, with the US consumer price index (CPI) moderating in the month of May.

Investors gained further confidence that inflation is cooling as the US Producer Price Index  (PPI) fell by 0.2% in May, declining by the most since October. 

With rising hopes that the Fed may start cutting interest rates, we have seen a decline in US government bond yields.

For example, the 10 year US government bond yield has fallen to 4.2% from about 4.5% a week ago. 

US 10-year government bond yield 20 june 2024
Source: Tradingview

The US 2-year government bond yield has also fallen to 4.7% from 4.9% a week ago. 

US 2-year government bond yield 20 june 2024
Source: Tradingview

#2 – Singapore T-bill yields have declined too

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

The closing yield on the 10-year Singapore government bond has fallen to 3.17% on 14 June from 3.29% on 10 June. 

Likewise, the closing yield on the 6-month Singapore T-bill has fallen to 3.71% compared to the cut-off yield of 3.76% in the auction on 6 June. 

6-month singapore t-bill closing yield 14 june 2024
Source: MAS

 

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 3.88% in the auction on 11th June, little changed from the auction in previous weeks. 

3-month singapore t-bill closing yield 11 june 2024
Source: MAS

#3 – Smaller issuance size in the upcoming T-bill auction

I also noticed that the amount of T-bills issued in the upcoming auction will be reduced to $6.6 billion.

This would be a decline from the record T-bill issuance size of S$7.1 billion in the previous auction.

In the previous auction on 6 June, we saw that demand for the 6-month Singapore T-bill declining slightly to S$14.3 billion. 

6 month t-bills application results 6 june

If demand for the T-bill stays at the current level, the smaller amount of T-bills issued may lead to a reduction in the cut-off yield in the auction.

What would Beansprout do?

The closing yield on the 6-month Singapore T-bill has declined slightly to 3.71%, below the cut-off yield of 3.76% in the previous auction.

In addition, there are several other factors that may lead to a potentially lower cut-off yield in the upcoming auction.

US government bond yields have moderated in the past week with growing signs of easing inflation. In addition, the issuance size of the upcoming T-bill auction will be lower. 

Despite the decline in the closing yield of the 6-month Singapore T-bill, it remains above the best 6-month fixed deposit rate of 3.35% p.a.

Hence, I would still consider the upcoming 6-month Singapore T-bill as a safe way to earn a higher return on our savings in the short term. 

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. 

The 6-month Singapore auction will be held on Thursday, 20 June 2024.  We would need to put in our cash applications for the T-bill by 9pm on 19 June (Wed).

Don't miss out on the next T-bill
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Sign up to receive a free email reminder when the next Singapore T-bill auction is open.

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.

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. 

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