We got the auction result for T-bill BS24103H, and the good news is that the cut-off yield rebounded strongly to 3.66%! After a steep decline in the previous auction, it is a relief that the yield rebounded again. Congrats to everyone who got their allocation! What drove the higher yield?
Auction Summary
Here is the summary of the T-bill BS24103H auction result:
Yield Rebounded Strongly
After a downward trend in the past several auctions, this T-bill BS24103H auction result gave investors a bit of a relief. The cut-off yield jumped to 3.66%, a respectable level considering the previous auction of ‘only’ 3.54%.
The historical 6-month T-bill yield chart above shows we’re back in the bottom range we saw throughout 2023. If we zoom out further, we can see the current level is still among the highest in recent years. That’s a pretty good yield!
What could have caused the rebound?
Demand Dropped
Demand dropped in this T-bill BS24103H auction. Total applied bids were $13.5 billion, down from $14.6 billion in the previous auction. Whew, that’s $1.1 billion less! Although most of the drop in demand came from competitive bids, non-competitive bids also fell from $2.2 billion to $2.0 billion in this auction. Because non-competitive bids remained below the allocation limit, all non-competitive bidders received their full allocation. Congrats!
The total available allotment amount was also higher in this auction at $6.6 billion, up from $6.3 billion in the previous auction.
The higher allotment amount combined with significantly lower demand could have been a main driver of the rebound.
Market Rates Projection
Those who follow recent news may be aware of persistent inflation. Here is the historical US CPI and Core CPI data:
The most recent CPI data shows a significant decline from its June 2022 peak. However, it remains above the long-term 2% target, indicating persistent inflation. The CPI and Core CPI have plateaued at around 3% and 4%, respectively.
Because inflation is sticky, the market expects the Fed to delay the first rate cuts until the second half of this year. Previously, the market expected the rate cut to start in March!
This shift in market expectations about the rate-cut timeline may be another factor driving the yield rebound. As market participants expected rates to stay elevated longer, there was no rush to lock in rates now, which psychologically allowed them to bid more competitively.
T-Bill Alternatives
Fixed Deposits
With the rebound in the T-bill BS24103H auction, T-bill yields are now higher than the highest 6-month fixed deposit offering. Currently, the highest 6-month fixed deposit rate is 3.50% from CIMB (or 3.55% if you are their preferred banking client). So, it is fair to say that T-bills are more competitive than fixed deposits.
To check the latest fixed deposit rates across major banks in Singapore, see our coverage of the best fixed deposit rates in Singapore.
Cash Management Accounts
Another alternative to T-bills is a cash management account, especially one with guaranteed payouts. They are similar to regular fixed deposits, except they don’t have SDIC insurance.
We can look into Syfe Cash+ Guaranteed and StashAway Simple Guaranteed for guaranteed cash management solutions. As of this writing, both offer 3.6% for their 6-month lock-up period. The 3.6% offerings closely align with the most recent T-bill yield and can therefore be competitive alternatives to T-bills.
If you did not get the latest T-bills allocation, you could consider investing in these cash management accounts, given that you can accept their inherent risk. Otherwise, we still think T-bills are the more competitive option.
What Would We Do?
We are pleased with the result of this T-bill BS24103H auction. The strong rebound was a relief after yields declined in the past several auctions. We like T-bills for parking short-term cash and will continue to use them in the short term. However, with interest rates expected to reverse this year, we have moved some of our short-term cash needs into Singapore Savings Bonds (SSB) to lock in higher rates for much longer while still maintaining liquidity through monthly redemptions.
So, did you get your T-bills allocation in this auction?
If you are interested in applying for the next T-bill, you may follow our guide on how to buy T-bills.
If you plan to apply using CPF, you can estimate the additional interest you may earn with our CPF T-bill calculator.
