Will the T-bill yield bounce further in the auction on 7 December?

What happened?

The second-last 6-month Singapore T-bill auction of this year will be held on 7 December 2023. 

In the previous 6-month Singapore T-bill auction on 23 November, the cut-off yield rose unexpectedly to 3.8%.

This led to questions on whether we will continue to see bounce in the upcoming 6-month T-bill auction (BS23124S).

In this article, we will look at some of the latest indicators to find out what the cut-off yield for the upcoming 6-month T-bill auction might be.

Will the Singapore T-bill yield bounce further?

#1 – US bond yields continue to decline

Since the Fed meeting in November, US government bond yields have been falling sharply.

Over the past few weeks, investors have gained increasing confidence that the Fed might be done with raising interest rates. 

This has led to a decline in the 10-year US government bond yield to about 4.2% as of 1 December from a peak of 5.0% in October. 

The chart below shows a similar decline in the 2-year US government bond yield, which has fallen to 4.5% from a peak of above 5.2% just less than two months ago. 

#2 – Shorter term Singapore government bond yields have remained steady

Singapore government bond yields have remained relatively steady despite the sharp decline in US government bond yields.

The closing yield on the 10-year Singapore government bond was at 2.99% on 1 December, little changed from 24 November.

Likewise, the closing yield on the 6-month Singapore government bond was at 3.81% on 1 December, quite similar to the cut-off yield in the auction on 23 November. 

Some investors may also reference shorter maturity Singapore government bonds to get an indication of how the T-bill yield is trending. 

The cut-off yield on the 3-month MAS note was at 4.04% in the auction on 28 November, unchanged from the auction on 15 November.

#3 – Potentially lower demand in December

In the previous auction on 23 November, we saw a slight increase in the cut-off yield to 3.8% despite lower US government bond yields.

We noted that this might be due to an increase in the amount of T-bills issued to S$6.0 billion. 

The amount of T-bills to be issued in the auction on 7 December remains high at S$5.9 billion, even though it is slightly lower than the previous auction. 

On the other hand, there could be possibly lower seasonal demand for T-bills in December, like what we saw in the auction on 8^th December 2022. 

As a recap, the auction saw the cut-off yield on the 6-month T-bill auction reach a high of 4.4%, as demand fell sharply compared to recent auctions. 

We will be looking out closely for whether this trend of lower T-bill applications in December will continue this year. 

What would Beansprout do? 

For investors looking to put their savings into T-bills, the good news is that the yield on the 6-month Singapore T-bill has remained steady despite the fall in US government bond yields. 

The closing yield on the 6-month Singapore T-bill remained at 3.81% on 1 December 2023, quite similar to the cut-off yield in the previous auction. 

The closing yield is also higher than the best 6-month fixed deposit rate in December of 3.60%. 

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 7 Dec (Thur), which means that we would need to put in our cash applications by 9pm on 6 Dec (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 6 Dec (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 6 Dec (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 5 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.

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