Will the T-bill yield rebound in the auction on 25 April?

What happened?

There has been quite a lot of discussion about the Singapore T-bill in the Beansprout community recently.

After all, the cut-off yield on the previous 6-month Singapore T-bill auction has stayed high at 3.75%, despite the fall in fixed deposit rates. 

The cut-off yield on the latest 1-year Singapore T-bill auction has also rebounded to 3.58%.

This led many to ask if we will also see a bounce in the upcoming 6-month Singapore T-bill auction (BS24108V) on 25 April 2024. 

Hence I decided to take a look at the latest indicators to find out if it might be worthwhile applying for the T-bill. 

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Will the Singapore T-bill yield rebound in the upcoming auction?

#1 – US government bond yields have risen sharply

Firstly, I noticed that US government bond yields have risen sharply in the past few weeks.

The 10-year US government bond yield has jumped to above 4.6% from 4.2% at the beginning of April.

This is driven by moderating expectations of interest rate cuts by the US Federal Reserve after inflation stayed persistent in recent months. 

The US 2-year government bond yield is now hovering around 5.0%, increasing from 4.6% at the start of the month. 

#2 – Longer-maturity Singapore government bond yields have gone up as well

The yield on longer maturity Singapore government bonds have also risen with the jump in US government bond yields.

This is clearly seen in the 10-year Singapore government bond yield, which increased to 3.36% on 19 April 2024 from 3.10% on 1 April.

The 6-month Singapore T-bill yield has remained elevated at 3.75%, similar to the cut-off yield in the previous auction. 

Interestingly, we have not seen a similar increase in the cut-off yield of the 3-month MAS bill. 

In fact, the cut-off yield has fallen to 3.83% in the latest auction on 16^th April from 3.93% in the auction on 2^nd April.  

#3 – Demand may increase further compared to previous auction

We have seen a jump in demand for the 6-month T-bill in recent auctions. 

The total amount of applications jumped to a record high of S$16.0 billion in the auction on 11 April from S$12.4 billion in the auction on 29 February.

This might be because the yield on the T-bill is looking increasingly attractive compared to the best 6-month fixed deposit rate of 3.25% p.a.

It might also be worth noting that there the amount of T-bills issued in the upcoming auction will increase slightly to S$6.6 billion from S$6.3 billion in the previous auction.

This may help to support the cut-off yield on the T-bill so long as we do not see a sharp increase in the amount of T-bill applications.

What would Beansprout do?

Despite the sharp increase in US government bond yield, the closing yield on the 6-month Singapore T-bill has remained stable at 3.75%. 

This is still significantly higher than the best 6-month fixed deposit rate of 3.25% p.a. 

As such, I would 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. 

If you are worried that a spike in demand may cause the cut-off yield to fall sharply, it might be worth considering putting in a competitive bid. 

When we submit a competitive bid, we will only invest in the T-bill if the yield is above a certain level.  To find out how to make a competitive T-bill bid, check out our guide here.

The 6-month Singapore auction will be held on Thursday, 25 April 2024. We would need to put in our cash applications for the T-bill by 9pm on 24 April (Wed).

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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.

• Applications for T-bills online using CPF OA via DBS close at 9pm on 24 April (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 24 April (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 23 April (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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