T-bill yield at 4.28%: What the latest auction tells us about what investors are doing



By Beansprout • 21 Dec 2022 • 0 min read

Investors putting in competitive bids are expecting a higher yield for the T-bill compared to previous auctions.

T bill auction 21 Dec

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What happened?

After the last T-bill auction when the yield rose to 4.4%, there were more investors who started looking at T-bills once again.

Since the yield in the T-bill auction depends on the bids submitted, this then led to concerns that there might be a sharp decline in yield.

Thankfully, this did not happen as the cut-off yield for the latest auction on 21 December was at 4.28%. 

Many investors would probably be quite pleased they are able to get a higher return than most fixed deposit accounts through the T-bill.

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Source: MAS

What we learnt from the latest T-bill auction

#1 - Demand for T-bill improves from previous auction

The total amount of subscriptions rose to $11.8 billion from $9.3 billion in the previous auction. 

This is quite similar to the total amount of subscriptions for the auction on 24 November. 

Quite clearly, the higher interest rate for the T-bill in the previous auction has attracted more investors to subscribe to the T-bill again. 

This is notwithstanding lower investor typically in the month of December as some may be away for their year end holidays. 

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#2 - Non-competitive bids receive full allocation again

For the second consecutive time, investors who put in non-competitive bids were able to get full allocation for the T-bill subscriptions.

There were $1.6 billion of non-competitive bids submitted this time, below the $1.8 billion of maximum allocation for non-competitive bids. 

Reflecting the general increase in demand for T-bills, the amount of non-competitive bids also grew from $1.2 billion in the previous auction.

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#3 - Competitive bids move higher

What was interesting to us from the recent auction is that the yield on the T-bill has not fallen by much even with the increase in demand. 

In addition, government bond yields have fallen over the past two weeks.

As we shared earlier, the cut-off yield for the T-bill auction is determined by the competitive bids that are made. 

Apart from the amount of bids that are made, the yields that investors are putting in their competitive bids will also determine the cut-off yield. 

If investors are making competitive bids at higher yields, then the cut-off yield for the T-bill would potentially be higher. 

The average yield for competitive bids was at 3.76% p.a. in the latest auction, quite similar to average yield in the previous auction of 3.73%.

However, the median yield rose to 4.0% p.a. in this auction compared to 3.85% p.a. in the previous auction.

This might explain why the cut-off yield has moved up even though the amount of subscriptions have risen to levels last seen in the auction on 24 November, when the cut-off yield was at 3.9%. 

What would Beansprout do?

The full allocation for non-competitive bids, and cut-off yield that is higher than most fixed deposit accounts should be good news to investors. 

For those who were allocated the T-bill, the issue date will be on 27th December.


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Source: MAS

If you missed out on the T-bill auction this time, the next 6-month T-bill auction will be on 5 Jan 2023. 

In the meantime, you can also consider the Singapore Savings Bonds (SSB), which offers an average 10-year return of 3.26% with the flexibility of redemption without penalty.

Alternatively, you can also get a relatively safe return with a fixed deposit account with CIMB dangling a 4.15% interest rate for a 1 year deposit of S$10,000

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