Will the T-bill yield drop below 3.65% in the auction on 6 June?

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Bonds

By Gerald Wong, CFA • 01 Jun 2024 • 0 min read

The closing yield on the 6-month Singapore T-bill remains at 3.65% even though US bond yields have climbed.

6-month singapore t-bill auction 6 june 2024.jpg
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What happened?

Some investors were disappointed with the result of the previous Singapore T-bill auction.

After all, the cut-off yield had fallen to 3.65%, the lowest level since February this year.

As a result, there were questions in the Beansprout community about whether we will see a further decline in the cut-off yield in the upcoming T-bill auction (BS24111X) on 6 June

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

6-month singapore t-bill auction 6 june 2024
Source: MAS

 

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Will the T-bill yield fall further in the auction on 6 June?

#1 – US government bond yields have bounced in recent weeks

US government bond yields have gone up in the last few weeks.

This came after the minutes from the latest Federal Reserve meeting indicated that officials remain worried about the lack of progress on inflation.

As a result, Fed officials noted that they lacked the confidence to go ahead with interest rate cuts. 

This has led to renewed investor expectations that interest rates may stay higher for longer. 

The US 10-year government bond yield has risen to 4.5% from 4.4% two weeks ago. 

US 10-year government bond yield june 2024
Source: Tradingview

 

Likewise, the US 2-year government bond yield has risen to 4.9% from 4.8% two weeks ago. 

US 2-year government bond yield june 2024
Source: Tradingview

#2 – Singapore government bond yields have risen slightly too

Singapore government bond yields have also gone up with the rise in US government bond yields.

The closing yield on the 10-year Singapore government bond has risen to 3.34% on 31 May from 3.16% on 16 May

However, we have not seen significant changes to the yield on bonds with shorter maturities.

The closing yield on the 6-month Singapore T-bill remains at 3.65% on 31 May, unchanged from the previous auction.

6-month singapore t-bill closing yield 31 may 2024
Source: MAS

 

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 3.86% in the auction on 28th May, little changed from the auction in previous weeks. 

3-month singapore t-bill closing yield 28 may 2024
Source: MAS

#3 – Further increase in T-bills issued

It might be worth noting that the amount of T-bills issued in the upcoming auction will be increased further to S$7.1 billion.

This would be an increase from the issuance size of S$7.0 billion in the previous auction, and represents the largest amount of 6-month T-bills on auction.

In the previous auction on 23 May, we saw that demand for the 6-month Singapore T-bill moderating to S$14.5 billion 

If demand for the T-bill continues to fall, the larger amount of T-bills issued may then help to support the cut-off yield in the auction.

6 month t-bills application results 23 may

What would Beansprout do?

The closing yield on the 6-month Singapore T-bill has stayed at 3.65%, similar to the cut-off yield in the previous auction.

However, there are several factors that may help to support the cut-off yield in the upcoming auction.

Firstly, US government bond yields have gone up in recent weeks. Also, the issuance size of the T-bill will increase further. 

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. 

This is because the closing yield on the Singapore T-bill remains significantly above the best 6-month fixed deposit rate of 3.35% p.a.

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, 6 June 2024. We would need to put in our cash applications for the T-bill by 9pm on 5 June (Wed).

Don't miss out on the next T-bill
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Sign up to receive a free email reminder when the next Singapore T-bill auction is open.

 

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.

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 for the latest insights on Singapore stocks, REITs, bonds and ETFs. 

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