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

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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.

singapore t-bill auction 7 Nov 2024.jpg
In this article

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. 

6-month singapore t-bill auction 07 Nov 2024
Source: MAS
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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. 

US 10-year government bond yield 1 Nov 2024
Source: Tradingview

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. 

US 1-year government bond yield 1 Nov 2024
Source: Tradingview

#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. 

Singapore 10-year government bond yield 1 Nov 2024
Source: Tradingview

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.

6-month singapore t-bill closing yield 30 oct 2024
Source: MAS

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-month singapore t-bill closing yield 29 oct 2024
Source: MAS

#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. 

6 month t-bills application results 24 oct 2024

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.

Breakeven Cut-Off Yield for T-Bill Bids via CPF OA

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).

Stay updated on the next T-bill
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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.

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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