Here's what to expect for the T-bill auction on 28 Jan

What happened?

It seems like T-bills are back in favour again with the record amount of T-bill applications in the previous auction.

Amidst my Lunar New Year preparations, I am watching the 6-month Singapore T-bill auction (BS25102Z) on 28 January 2025 closely. 

I have seen some questions in the Beansprout community about the upcoming T-bill auction, including whether there will be loss of additional CPF interest for CPF-OA applications. 

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

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Here's what to expect for the Singapore T-bill auction on 28 Jan

#1 – US bond yields remain elevated

US government bond yields have stayed high in recent weeks.

The 10-year US government bond yield was at 4.6% at at 23 January, having retreated from a recent high of close to 4.8%, following a moderation in inflation in the US. 

However, the yield remains above where it was at the end of December 2024. 

This is due to concerns that US President Donald Trump's policies may drive inflation once again. 

On the other hand, short term bond yields have remained stable in the past few weeks. 

The 1-year US government bond yield has stayed at around the 4.2% level in the past month. 

#2 – Closing yield on 6-month Singapore T-bill has been stable

We have seen a similar trend in Singapore government bond yields, where longer term bond yields have retreated from recent highs but remain fairly elevated. 

The Singapore 10-year government bond yield has moderated slightly to 2.94% from a recent high of 3.1%, but remains above the level it was at in December 2024. 

At the same time, shorter bond yields have remained stable. 

The closing yield on the 6-month T-bill was 2.99% on 23 January, the same as the cut-off yield of 2.99% in the previous T-bill auction on 16 January.

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 3.07% in the auction on 21 January, falling from 3.18% in the auction on 14 January, and representing the lowest level in the past two months. 

#3 – Potential loss of additional CPF interest

One of the questions we have been getting is whether there will be a loss of additional CPF interest in the upcoming auction on 28 January. 

Here, it is worth noting that the T-bill issuance date is on 4 Feb 2025 and the maturity date is on 5 August 2025. 

Based on sharing from the Beansprout community, the deduction for successful CPF applications is typically done one business day after the auction date.

This means that there will be potentially 8 months of CPF interest loss from January to August.

The loss of additional CPF interest will mean that the break-even yield for the T-bill auction will be higher. 

To find out if it might still be worthwhile applying for the T-bill using CPF with the loss of additional CPF interest, you can check out our CPF-T-bill calculator. 

However, as a member in the Beansprout community pointed out, the loss of two additional months of CPF interest may matter more if you plan to stop investing in the T-bill and transfer the fund back to your CPF account. 

If you intend to roll over to an upcoming T-bill when the existing one matures, then the impact may not be as significant. 

In the past, we have seen lower demand for the T-bill when there is additional CPF interest loss, as there may be less applications using CPF funds.

We saw a surge in the amount of T-bill applications to $18.4 billion in the auction on 16 Jan. If demand were to fall, this may help to provide some support to T-bill yields

What would Beansprout do? 

The closing yield on the 6-month Singapore T-bill was at 2.99% on 23 January, the same as the cut-off yield in the previous auction.

This is because the yield on shorter maturity bonds have remained fairly stable in the past few weeks.

The closing yield on the 6-month Singapore T-bill yield would be above the best 6-month fixed deposit rate of 2.75% p.a., as banks have cut their interest rates in January 2025. 

However, the yield on the 6-month Singapore T-bill would be below some of the interest rates offered by no-frills savings accounts. You can compare the yield for T-bills with fixed deposits and savings accounts here to find out where is the best place to park your savings. 

For CPF investors, it is important to note the potential loss of additional CPF interest in the upcoming auction.. 

You can find out how much more interest you can potentially earn on the Singapore T-bill using our CPF-T-bill calculator.

Due to the upcoming Lunar New Year holidays, the T-bill auction will be held on 28 January (Tuesday). 

This means that we would need to put in our cash applications for the T-bills by 9 pm on 27 January (Monday).

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• Reminder for Tbill

• Applications for T-bills online using CPF OA via DBS close at 9pm on 27 Jan (Mon). Read our step-by-step guide to applying via DBS. 

• Application for T-bills online using CPF OA via OCBC close at 9pm on 27 Jan (Mon). Read our step-by-step guide to applying via OCBC.

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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