Will the Singapore T-bill yield fall with lower US bond yields?

What happened?

Many investors are eyeing the Singapore T-bill once again after the cut-off yield reached 3.95% in the previous auction.

However, some would have noticed that US bond yields fell sharply in recent days after the Fed kept interest rates unchanged in its latest meeting.

This led to questions on whether the upcoming 6-month T-bill auction (BS23122F) on 8 November 2023 will offer a similarly attractive yield. 

Let us look at what the latest indicators are telling us on whether it might still be worthwhile applying for 6-month Singapore T-bill. 

Will the yield on the 6-month Singapore T-bill fall?

#1 – US bond yields fell sharply after Fed meeting

US government bond yields declined in recent days after investors gained confidence that the Fed might be done with hiking interest rates. 

In the latest meeting in November, the Fed kept its benchmark interest rate unchanged at 5.25% to 5.5% again.

Following the meeting, the 2-year US government bond yield fell to about 4.84% from 5% just a week ago.

This marks a significant decline from a recent peak in the 2-year US government bond yield of 5.25%.

The decline in the 10-year US government bond yield is even more significant.

Having reached a 16-year high of above 5.0% in late August, the 10-year US government bond yield has fallen to 4.57% following the Fed meeting.

 #2 – Shorter term Singapore government bond yields have fallen slightly

Singapore government bond yields have also fallen with the lower US bond yields. 

The closing yield on the 10-year Singapore government bond fell to 3.21% on 3 November from 3.39% on 1 November. 

The closing yield on the 6-month Singapore T-bill was 3.89% on 3 November, slightly below the closing yield of 3.90% on 1 November and the cut-off yield in the previous auction of 3.95%.

Some investors may also be tracking the 3-month MAS note closely to get an indication of shorter maturity Singapore government bonds. 

The cut-off yield on the 3-month MAS note remains elevated at 4.14% on 31 October. However, this would likely not have reflected the fall in bond yields after the Fed meeting on 1 November. 

#3 – Higher demand likely in upcoming auction

In the previous auction on 26 October, we observed that total applications fell to S$11.5 billion from S$14.7 billion in the auction on 12 October. 

We shared that the lower demand might be due to the loss of additional CPF interest, which led to fewer CPF applications. 

Hence, we might see a normalisation of demand in the upcoming auction. 

In addition, there might be more applications as the higher yield in the previous auction is likely to attract more investors in the T-bill.    

What would Beansprout do?

The closing yield on the 6-month Singapore T-bill has fallen to 3.89% on 3 November 2023, as US government bond yields have fallen sharply after the recent Fed meeting.

In addition, we might see an increase in applications in the upcoming auction compared to the previous auction with a normalization in CPF applications. 

The higher demand might further lower the cut-off yield in the upcoming auction.

Despite the fall in government bond yields, the 6-month Singapore T-bill closing yield remains higher than the best 6-month fixed deposit rate of 3.60%. 

As such, we continue to like 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.

If you are interested in the T-bill, you might want to note that the upcoming 6-month T-bill auction will be held on a Wednesday rather than Thursday due to the upcoming Deepavali holiday.

The auction will be held on 8 Nov (Wed), which means that we would need to put in our cash applications by 9pm on 7 Nov (Tue).

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 7 Nov (Tue). Read our step-by-step guide to applying via DBS. 
• Application for T-bills online using CPF OA via OCBC close at 9pm on 7 Nov (Tue). Read our step-by-step guide to applying via OCBC
• Applications for T-bills online using CPF OA via UOB close at 9pm on 6 Nov (Mon) 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.

Learn how you can gain access to a diversified income portfolio beyond T-bills here. 

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