Will the T-bill yield rise further in the auction on 21 November?

What happened

The next 6-month Singapore T-bill auction (BS24123F) will be coming up on 21 November 2024.

I have seen some discussion in the Beansprout community on whether we will see a further increase in the Singapore T-bill yield, after the cut-off yield for the previous 6 month T-bill rebounded to 3.04%. 

This is especially so with US government bond yields rising further in recent weeks. 

As such, I decided to find out what the latest indicators tell us about the potential yield on the upcoming T-bill auction. 

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Will the Singapore T-bill yield rise further in the auction on 21 November?

#1 – US bond yields have increased further

The US government bond yield has rebounded recently following the election of  Donald Trump as the 47th President of the United States.

In addition, Fed Chairman Jerome Powell recently commented that "the economy is not sending any signals that we need to be in a hurry to lower rates."

As a result, the 10-year US government bond yield has risen to close to 4.5%, reaching a high last observed in July 2024.

The 1-year US government bond yield has also risen to close to 4.4% from 4.3% two weeks ago. 

#2 – Closing yield on 6-month Singapore T-bill has fallen slightly

The bounce in US government bond yields has also led to an increase in the yield on longer-maturity Singapore government bonds. 

For example, the Singapore 10-year government bond yield has increased to 2.96%, the highest since August 2024.

This is also significantly above its low of close to 2.4% in the middle of September. 

The closing yield on the 6-month T-bill was 3.01% on 14 November, slightly below the cut-off yield of 3.04% in the previous T-bill auction on 7 November.

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 3.28% in the auction on 12 November, higher than the cut-off yield of 3.20% in the auction on 5 November. 

#3 Larger issuance size compared to the previous auction

The issuance size of the upcoming 6-month Singapore T-bill increased to $7.0 billion, higher than S$6.8 billion from the previous few auctions. 

We saw a decline in the amount of T-bill applications to S$12.3 billion in the auction on 7 November from S$13.5 billion in the auction on 24 October.

If demand for the T-bill were to continue falling, we might see further support to the cut-off yield for the T-bill. 

What would Beansprout do? 

We have seen a further bounce in US government bond yields in recent weeks. The 10-year Singapore government bond yield has increased as well. 

With the closing yield on the 6-month Singapore T-bill at 3.01%, it appears likely that the cut-off yield in the upcoming auction on 21 November will stay above 3% too. 

For cash investors, the closing yield on 6-month Singapore T-bill is now slightly above the best 6-month fixed deposit rate of 2.90% p.a.

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.

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 global bond yields 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.

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

The 6-month Singapore auction will be held on 21 Nov.  We would need to put in our cash applications for the T-bills by 9 pm on 20 Nov (Wed).

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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 20 Nov (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 20 Nov (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 19 Nov (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.

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