Will the T-bill yield fall further in the auction on 23 November?

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By Beansprout • 18 Nov 2023 • 0 min read

The closing yield on the 6-month Singapore T-bill has fallen to 3.83% with a steep decline in US bond yields.

6-month singapore t-bill auction 23 nov 2023

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What happened?

Many investors noticed that bond yields have been falling recently. 

In the previous 6-month Singapore T-bill auction on 9 November, the cut-off yield fell to 3.75%. 

This led to questions on whether we will see a further decline in the upcoming 6-month T-bill auction (BS23123Z) on 23 November.

Let us look at the latest indicators to understand what the cut-off yield for the upcoming 6-month T-bill auction might be. 

6-month singapore t-bill auction 23 nov 2023
Source: MAS

Will the yield on the 6-month Singapore T-bill fall further?

#1 – US government bond yields have fallen sharply

US government bond yields have been declining sharply in the past few weeks

This came after the Fed hinted that it may be done with rate hikes in its latest meeting in November.

Inflation also appears to have eased further, with the consumer price index in October unchanged from the previous month

As seen in the chart below, the 10-year US government bond yield has fallen to about 4.4% after briefly exceeding 5.0% in October. 

US 10-year government bond yield 18 nov 2023
Source: Tradingview

Likewise, the US 2-year government bond yield has fallen to 4.89% from a peak of above 5.2% in October. 

2-year 10-year US government bond yield 18 nov 2023
Source: Tradingview

#2 – Singapore government bond yields have also declined

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

For example, the closing yield on the 10-year Singapore government bond has fallen to 2.97% on 17 November from 3.39% on 1 November. 

(Note to SSB investors: This may mean a lower 10-year average return on the next SSB issuance. Check out our latest projections here)

The closing yield on the 6-month Singapore T-bill has fallen by a smaller extent to 3.83% on 17 November. 

6-month singapore t-bill closing yield 17 nov 2023
Source: MAS

 

Looking at shorter maturity Singapore government bonds, the cut-off yield on the 3-month MAS note has also fallen to 4.04% in the auction on 15 November from 4.14% on 31 October.

3-month singapore t-bill 17 nov 2023
Source: MAS

#3 – Higher T-bill issuance amount compared to previous auction 

We have seen higher demand for T-bills in the auction on 8 November, leading to a lower cut-off yield in the auction. 

Hence, it might be worth highlighting that the amount of T-bills on auction will be increased to S$6.0 billion from S$5.7 billion in the previous auction.

This represents the highest amount of 6-month T-bills issued in an auction so far this year. 

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 3.99% when the amount of T-bills issued rose to $5.4 billion in the auction on 6 July from S$5.0 billion in the previous auction. 

What would Beansprout do?

With signs that the Fed might be done with raising interest rates, US government bond yields have fallen sharply in recent weeks. 

However, short-term Singapore government bond yields have not fallen as significantly, with the closing yield on the 6-month Singapore T-bill remaining at 3.83% on 17 November 2023. 

In addition, the higher amount of T-bills issued in the upcoming auction may also provide some support to the cut-off yield. 

For now, the 6-month Singapore T-bill closing yield remains higher than the best 6-month fixed deposit rate of 3.60%

As such, we continue to like the T-bill as 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.

If you would like to secure the high yields over a longer time period, then it might be worth considering Singapore Savings Bonds (SSBs) instead, where the current issuance offers a 10-year average return of 3.4% per year. 

The auction will be held on 23 Nov (Thur), which means that we would need to put in our cash applications by 9pm on 22 Nov (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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