Will the T-bill yield fall further in the auction on 4 January?

What happened?

As we enter the new year, investor interest in the Singapore T-bill does not seem to be subsiding.

The first 6-month Singapore 6-month T-bill auction (BS24100F) of 2024 will be held on 4 January 2024.

After the cut-off yield for the Singapore T-bill fell in the month of December, many have asked if we will continue to see the yield falling in the upcoming auction.

Let’s take a look at what the latest indicators are telling us about the potential yield for the T-bill auction, and if it is still worthwhile applying for the T-bill.

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

#1 – US bond yields have declined further 

After the US Federal Reserve indicated that interest rates may be cut in 2024, bond yields have been falling sharply.

The US 10-year government bond yield has fallen to 3.87% by the end of December 2023 after hitting a 16-year high of above 5.0% in late October. 

Likewise, the US 2-year government bond yield has fallen to 4.25% in late December from a recent peak of 5.2% in October. 

#2 – Singapore 6-month bond yield has held up

The yield on Singapore government bonds with longer maturities has also declined with the fall in US bond yields.

The closing yield on the 10-year Singapore government bond has declined slightly to 2.71% on 29 December from 2.76% on 15 December.

However, the closing yield on the 6-month Singapore T-bill has held up at 3.77% as of 29 December 2023. 

This is higher than the cut-off yield of 3.73% for the previous T-bill auction on 20 December.

Likewise, the cut-off yield for the 3-month MAS note auction on 27^th December has been stable at 4.07%, similar to what it was in the previous two auctions. 

Once again, the yield on Singapore government bond yields with shorter maturities have not declined as much as US government bond yields. 

#3 – Larger issuance size for upcoming T-bill auction

We have seen higher demand for T-bills remain elevated in the auction on 20 December, leading to a slightly 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$6.1 billion from S$5.6 billion in the previous auction.

This represents the highest amount of 6-month T-bills issued in an auction compared to any auction in the past 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 3.80% when the amount of T-bills issued rose to $6.0 billion in the auction on 23 November from S$5.7 billion in the previous auction. 

What would Beansprout do? 

As we enter the new year, the good news is that the closing yield on the 6-month Singapore T-bill has stayed high at 3.77% as of 29 December despite the sharp decline in US government bond yields. 

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 3.65%. 

Hence, we will continue to consider 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.

The auction will be held on Thursday, 4 January 2024. This means that we would need to put in our cash applications for the T-bill by 9pm on 3 January (Wed).

The closing date for T-bill applications using CPF-OA differs across the three local banks.

• Applications for T-bills online using CPF OA via DBS close at 9pm on 3 Jan (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 3 Jan (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 2 Dec (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.

Join our Beansprout Telegram group and Facebook group for the latest insights on Singapore stocks, REITs, bonds and ETFs. 

Learn more about investment opportunities in 2024

Sign up for the FSM Invest Expo 2024 and get a headstart on your investing journey in the new year. Register for free now and stand a chance to win more than S$20,000 worth of lucky draw prizes and sure win prizes throughout the day!