Here's what to expect for the T-bill auction on 4th July

What happened?

The first half of 2024 is almost over.

As we head into the second half of the year, there will be an upcoming 6-month Singapore T-bill auction (BS24113N) on 4^th July 2024.

The cut-off yield for the most recent 6-month T-bill has been fairly stable at 3.74%.

This led to a question in the Beansprout community on whether we will continue to see the yield on the T-bill remaining high. 

In this post, I will be looking at some of the latest indicators to find out if it might 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 4th July

#1 – US government bond yields have been fairly stable

US government bond yields have been fairly stable over the past two weeks, as investors await further signals on the Federal Reserve’s interest rate direction.

The US 10-year government bond yield has risen slightly to 4.3% from 4.25% two weeks ago, as shown in the chart below. 

The US 2-year government bond yield was at about 4.7% on 28 June, close to the level two weeks ago.

#2 – Singapore T-bill yield closing yield has been fairly stable too

Mirroring the US government bond yields, the Singapore government bond yields have also held steady in the past two weeks.

While there was a bounce in the closing yield of 10-year US government bond on 27 June, it has normalized to 3.21% on 28 June. 

This is just slightly higher than the closing yield of 3.16% on 21 June. 

The closing yield on the 6-month Singapore T-bill was at 3.72% on 28 June 2024. This is also little changed from the cut-off yield of 3.74% in the auction on 20 June. 

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 3.93% in the auction on 25th June, little changed from the cut-off yield in the auction on 19^th June. 

#3 – T-bill issuance size cut further 

What I noticed was a further decline in the issuance size of the upcoming 6-month Singapore T-bill.

There will be S$6.5 billion of T-bills issued, a reduction from the S$6.6 billion of T-bills issued in the previous auction.

This also represents a decline from the record T-bill issuance size of S$7.1 billion in the auction on 6^th June.

In the auction on 20^th June, we saw an increase in the amount of T-bill applications to S$15.5 billion from S$14.2 billion in the previous auction.

Should demand for the T-bill continue to rise, the smaller issuance size may translate to a lower cut-off yield in the upcoming auction. 

What would Beansprout do?

The closing yield on the 6-month Singapore T-bill has held steady at 3.72%, little changed from the cut-off yield of 3.74% in the previous auction.

It also remains significantly above the best 6-month fixed deposit rate of 3.40% p.a.

Hence, I would still 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. 

The 6-month Singapore auction will be held on Thursday, 4 July 2024.  We would need to put in our cash applications for the T-bill by 9pm on 3 July (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 3 July (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 July (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 July (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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