Will the T-bill yield stay above 3% in the auction on 24 Oct?

What happened

Investors appear to be getting mixed signals about the Singapore T-bill recently. 

On one hand, we saw the cut-off yield for the previous 6 month Singapore T-bill rebounding to 3.06% in the auction on 10 October.

On the other hand, the cut-off yield for latest 1-year Singapore T-bill fell sharply to 2.71% in the auction on 17 October. 

With the next 6-month Singapore T-bill auction (BS24121A) coming up on 24 October 2024, I have seen questions in the Beansprout community about whether it is still worthwhile applying for the T-bill.

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

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Will the T-bill yield stay above 3% in the auction on 24 October?

#1 – US bond yields have rebounded slightly

The US government bond yield has rebounded slightly in the past few days,  as the latest economic data showed that US retail spending has remained strong. 

Investors have also moderated that expectations of sharp interest rate cuts by the US Federal Reserve. 

As such, the 10-year US government bond yield has hovered at around 4.1%, its highest level since July this year. 

Likewise, the 1-year US government bond yield has rebounded to above 4.2%, close to its highest level following the September rate cut by the Fed. 

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

As the US government bond yields remain close to their recent highs, Singapore government bond yields have followed the same trend too. 

In particular, the yield for longer maturity Singapore government bonds are now significantly above where they were at the lows in September. 

For example, the Singapore 10-year government bond yield has increased to 2.80% from a low of 2.41% in the middle of September and 2.75% on 4 October.

However, the closing yield on the 6-month T-bill was 3.01% on 17 October, falling slightly from the cut-off yield of 3.06% in the previous T-bill auction on 10 October.

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 3.28% in the auction on 15 October, lower than the cut-off yield of 3.32% in the auction on 8 October. 

#3 - Same issuance size as the previous auction

The issuance size of the upcoming 6-month Singapore T-bill remains at $6.8 billion, unchanged from the previous two auctions. 

We saw an increase in the amount of T-bill applications to S$14.9 billion in the auction on 10 October from S$13.9 billion in the auction on 26 September. 

If demand for the T-bill were to rise further, we might see a fall in the cut-off yield for the T-bill. 

What would Beansprout do? 

With the bounce in the T-bill yield in the previous auction, more investors might be looking at the T-bill once again.

The closing yield on the 6-month Singapore T-bill was at 3.01% on 17 October, falling slightly from the cut-off yield of 3.06% in the previous auction. 

For cash investors, the closing yield on 6-month Singapore T-bill is now slightly below the best 6-month fixed deposit rate in Singapore of 3.1% p.a.

For CPF investors, the closing yield is still 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.

To make sure that we do not end up with a lower than expected yield when applying for the T-bill. we can consider making a competitive bid for the T-bill. 

To earn a higher yield compared to the T-bill, we would also consider other places to park our cash.

The 6-month Singapore auction will be held on 24 Oct.  We would need to put in our cash applications for the T-bills by 9pm on 23 Oct (Wed).

Don't miss out on the next T-bill

Sign up to receive a free email reminder when the next Singapore T-bill auction is open.

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• Reminder for Tbill

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 23 Oct (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 23 Oct (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 22 Oct (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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