Will the T-bill yield bounce in the auction on 7 November?
Bonds
By Gerald Wong, CFA • 01 Nov 2024
Why trust Beansprout? We’re licensed by the Monetary Authority of Singapore (MAS).
The closing yield on the 6-month Singapore T-bill was at 2.99% on 30 October.
What happened
The yield on the T-bill has been moving around quite a bit recently.
The cut-off yield for the 6-month Singapore T-bill rebounded to 3.06% in the auction on 10 October. However, it fell to 2.99% n the next auction on 24 October.
With the next 6-month Singapore T-bill auction (BS24122E) coming up on 7 November 2024, some of you might be wondering if it is still worthwhile applying for the T-bill.
There have also been questions in the Beansprout community on whether it is better to put our money in T-bills or fixed deposits.
As such, I decided to find out what the latest indicators tell us about the potential yield on the upcoming T-bill auction.
Will the T-bill yield bounce in the auction on 7 November?
#1 – US bond yields have increased further
The US government bond yield has rebounded recently as US Federal Reserve officials sounded a more cautious tone on sharp rate cuts.
For example, the 10-year US government bond yield has risen to 4.27% from 4.10% two weeks ago.
The 1-year US government bond yield has also risen to above 4.3% from 4.25% two weeks ago. However, the increase has not been as significant as the rise in the 10-year US government bond yield.
#2 – Singapore government bond yields have not increased as much
The bounce in US government bond yields has also led to an increase in the yield on longer-maturity Singapore government bonds.
For example, the Singapore 10-year government bond yield has increased to 2.85% from 2.8% two weeks ago.
This is significantly above its low of close to 2.4% in the middle of September.
However, the closing yield on the 6-month T-bill was 2.99% on 30 October, unchanged from the cut-off yield of 2.99% in the previous T-bill auction on 24 October.
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 3.24% in the auction on 29 October, lower than the cut-off yield of 3.28% in the auction on 22 October.
#3 Same issuance size as the previous auction
The issuance size of the upcoming 6-month Singapore T-bill remains at $6.8 billion, unchanged from the previous few auctions.
We saw a decline in the amount of T-bill applications to S$13.5 billion in the auction on 24 October from S$14.9 billion in the auction on 10 October.
If demand for the T-bill were to continue falling, we might see further support to the cut-off yield for the T-bill.
What would Beansprout do?
Despite the bounce in US bond yields, we have not seen a significant jump in Singapore government bond yields.
The closing yield on the 6-month Singapore T-bill was at 2.99% on 30 October, similar to cut-off yield in the previous auction.
For cash investors, the closing yield on 6-month Singapore T-bill is now slightly above the best 6-month fixed deposit rate of 2.90% p.a.
For CPF investors, the closing yield is also slightly above the breakeven cut-off yield for CPF-OA funds.
You can find out how much more interest you can potentially earn on the Singapore T-bill using our CPF-T-bill calculator.
It is also worth noting that the cut-off yield for the T-bill auction will eventually depend on the applications that are submitted, and global bond yields remain volatile.
With the volatility, we can also consider making a competitive bid for the T-bill to make sure that we do not end up with a lower than expected yield.
As the T-bill yield has declined compared to 6 months ago, I will also be looking at other places to park my cash and earn a higher yield above 3%.
The 6-month Singapore auction will be held on 7 Nov. We would need to put in our cash applications for the T-bills by 9 pm on 6 Nov (Wed).
Applications for the T-bills 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 6 Nov (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 Nov (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 Nov (Tue). Read our step-by-step guide to applying via UOB.
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