{"id":1355,"date":"2023-05-31T10:37:26","date_gmt":"2023-05-31T02:37:26","guid":{"rendered":"https:\/\/www.wealthfor.us\/article\/?p=1355"},"modified":"2023-07-11T01:17:16","modified_gmt":"2023-07-10T17:17:16","slug":"singapore-t-bill-yield-jumped-to-3-85-what-caused-the-rise","status":"publish","type":"post","link":"https:\/\/www.wealthfor.us\/article\/singapore-t-bill-yield-jumped-to-3-85-what-caused-the-rise\/","title":{"rendered":"Singapore T-bill Yield Jumped to 3.85%. What Caused the Rise?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The <a href=\"https:\/\/www.mas.gov.sg\/bonds-and-bills\/auctions-and-issuance-calendar\/auction-t-bill?issue_code=BS23110X&amp;issue_date=2023-05-30\" target=\"_blank\" rel=\"noopener\">latest 6-month T-bill auction on 25 May<\/a> was good news for investors: the cut-off yield jumped to 3.85%. While the <a href=\"https:\/\/www.wealthfor.us\/article\/best-fixed-deposit-rates-singapore\/\">fixed deposit rates<\/a> started declining, the Singapore t-bill yield rebounded. Yay! What\u2019s driving the rebound on the yield, and should we invest in T-bill?<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2>T-bill Demand Rebounded<\/h2>\n<p><span style=\"font-weight: 400;\">The last T-bill application amount went up to $12.2 billion (up slightly from $12 billion from the previous auction). Though not significant, the rise in demand is still surprising to investors because of the trend of lower interest rates and the possibility of losing a one-month CPF interest rate due to the unfavorable maturity date.<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1356 size-full\" src=\"https:\/\/www.wealthfor.us\/article\/wp-content\/uploads\/2023\/05\/T-bill-demand.png\" alt=\"Singapore T-bill demand chart\" width=\"900\" height=\"500\" srcset=\"https:\/\/cdn.wealthfor.us\/uploads\/2023\/05\/T-bill-demand.png 900w, https:\/\/cdn.wealthfor.us\/uploads\/2023\/05\/T-bill-demand-300x167.png 300w, https:\/\/cdn.wealthfor.us\/uploads\/2023\/05\/T-bill-demand-768x427.png 768w\" sizes=\"auto, (max-width: 900px) 100vw, 900px\" \/><\/p>\n<p><span style=\"font-weight: 400;\">The T-bill demand rise may be partially attributed to the lower interest rate alternative from the fixed deposits, which have steadily declined in the past few months. This higher demand may contribute to a slight rebound in the final cut-off yield.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2>Larger T-bill Allotment Size<\/h2>\n<p><span style=\"font-weight: 400;\">This last T-bill auction saw a total allotment amount of $5.3 billion, slightly higher than the previous issuance amount of $5 billion. The slight bump in the allotment size may contribute to the higher cut-off yield as more bids receive their allocation.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2>US Interest Rate Rising &amp; Market Expectation<\/h2>\n<p><span style=\"font-weight: 400;\">The rebound in Singapore T-bill yield was unsurprising considering the recent rise in the short-term and long-term US treasury rates.<\/span><\/p>\n<figure id=\"attachment_1357\" aria-describedby=\"caption-attachment-1357\" style=\"width: 944px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-1357\" src=\"https:\/\/www.wealthfor.us\/article\/wp-content\/uploads\/2023\/05\/Screenshot-2023-05-31-at-12.17.32-AM-min.png\" alt=\"The 6-month treasury rate chart\" width=\"944\" height=\"356\" srcset=\"https:\/\/cdn.wealthfor.us\/uploads\/2023\/05\/Screenshot-2023-05-31-at-12.17.32-AM-min.png 944w, https:\/\/cdn.wealthfor.us\/uploads\/2023\/05\/Screenshot-2023-05-31-at-12.17.32-AM-min-300x113.png 300w, https:\/\/cdn.wealthfor.us\/uploads\/2023\/05\/Screenshot-2023-05-31-at-12.17.32-AM-min-768x290.png 768w\" sizes=\"auto, (max-width: 944px) 100vw, 944px\" \/><figcaption id=\"caption-attachment-1357\" class=\"wp-caption-text\">The 6-month treasury rate chart shows a steady rise in the past few weeks.<\/figcaption><\/figure>\n<figure id=\"attachment_1358\" aria-describedby=\"caption-attachment-1358\" style=\"width: 783px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-1358\" src=\"https:\/\/www.wealthfor.us\/article\/wp-content\/uploads\/2023\/05\/Screenshot-2023-05-30-at-10.57.25-PM-min.png\" alt=\"The 10-yr treasury rate chart\" width=\"783\" height=\"299\" srcset=\"https:\/\/cdn.wealthfor.us\/uploads\/2023\/05\/Screenshot-2023-05-30-at-10.57.25-PM-min.png 783w, https:\/\/cdn.wealthfor.us\/uploads\/2023\/05\/Screenshot-2023-05-30-at-10.57.25-PM-min-300x115.png 300w, https:\/\/cdn.wealthfor.us\/uploads\/2023\/05\/Screenshot-2023-05-30-at-10.57.25-PM-min-768x293.png 768w\" sizes=\"auto, (max-width: 783px) 100vw, 783px\" \/><figcaption id=\"caption-attachment-1358\" class=\"wp-caption-text\">The 10-yr treasury rate chart also shows a significant rise in the past few weeks.<\/figcaption><\/figure>\n<p><span style=\"font-weight: 400;\">Many factors were in play: <a href=\"https:\/\/www.bbc.com\/news\/world-us-canada-65744615\" target=\"_blank\" rel=\"noopener\">the debt ceiling issue<\/a>, <a href=\"https:\/\/www.cnbc.com\/2023\/04\/27\/gdp-q1-2023-.html\" target=\"_blank\" rel=\"noopener\">the growing US economy<\/a>, <a href=\"https:\/\/www.cnbc.com\/2023\/05\/26\/inflation-rose-0point4percent-in-april-and-4point7percent-from-a-year-ago-according-to-key-gauge-for-the-fed.html\" target=\"_blank\" rel=\"noopener\">the sticky inflation<\/a>, <a href=\"https:\/\/www.cnbc.com\/2023\/05\/03\/fed-rate-decision-may-2023-.html\" target=\"_blank\" rel=\"noopener\">the Fed that keeps increasing rates<\/a>, and the market not expecting interest rate cuts so early.<\/span><\/p>\n<figure id=\"attachment_1359\" aria-describedby=\"caption-attachment-1359\" style=\"width: 660px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-1359\" src=\"https:\/\/www.wealthfor.us\/article\/wp-content\/uploads\/2023\/05\/Screenshot-2023-05-30-at-11.14.29-PM-min.png\" alt=\"Market rate expectation\" width=\"660\" height=\"308\" srcset=\"https:\/\/cdn.wealthfor.us\/uploads\/2023\/05\/Screenshot-2023-05-30-at-11.14.29-PM-min.png 660w, https:\/\/cdn.wealthfor.us\/uploads\/2023\/05\/Screenshot-2023-05-30-at-11.14.29-PM-min-300x140.png 300w\" sizes=\"auto, (max-width: 660px) 100vw, 660px\" \/><figcaption id=\"caption-attachment-1359\" class=\"wp-caption-text\">The market is only expecting a 25bps rate cut toward the end of the year.<\/figcaption><\/figure>\n<p><span style=\"font-weight: 400;\">With the market generally not expecting interest rate cuts anytime soon and expecting the higher interest to stay, it is surprising for the Singapore local banks to cut their <a href=\"https:\/\/www.wealthfor.us\/article\/best-fixed-deposit-rates-singapore\/\">fixed deposit rates<\/a> so quickly. The T-bill auction result shows that the market still demands higher short-term rates, at least for now.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2>Should We Invest in T-bills? Better than Fixed Deposits?<\/h2>\n<p><span style=\"font-weight: 400;\">Many T-bills alternatives, such as cash management and high-yield savings accounts, yield higher than the latest cut-off yield of 3.85%. However, with these alternatives, there is usually a &#8216;catch.&#8217; For example, some cash management accounts with higher interest do not guarantee your initial capital. High-yield savings accounts have many hoops you need to get through to receive the highest possible interest rate, thus rendering the effective interest rate much lower. Additionally, there is a limit on the amount you can put into the savings account to receive that high-interest rate.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">T-bill has no &#8216;catch&#8217; because the initial principal and interest are guaranteed for the whole duration regardless of market volatility. There is also a very high ceiling on the amount you can buy. You can buy as much as you want (subject to allotment size). With such characteristics, therefore, the best comparison to T-bill is the fixed deposit.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">With the T-bills yielding much higher than the fixed deposits, there is little reason to park your cash in fixed deposits. T-bill is just more attractive at the moment. And, if you want to be sure, you can use the competitive bid when applying for T-bill to ensure you will get the rates you can accept.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The latest 6-month T-bill auction on 25 May was good news for investors: the cut-off yield jumped to 3.85%. While the fixed deposit rates started declining, the Singapore t-bill yield rebounded. Yay! What\u2019s driving the rebound on the yield, and should we invest in T-bill? &nbsp; T-bill Demand Rebounded The last T-bill application amount went&hellip; <a class=\"more-link\" href=\"https:\/\/www.wealthfor.us\/article\/singapore-t-bill-yield-jumped-to-3-85-what-caused-the-rise\/\">Continue reading <span class=\"screen-reader-text\">Singapore T-bill Yield Jumped to 3.85%. What Caused the Rise?<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":1360,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[102],"tags":[],"class_list":["post-1355","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-singapore","entry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Singapore T-bill Yield Jumped to 3.85%. What Caused the Rise?<\/title>\n<meta name=\"description\" content=\"The latest Singapore T-bill yield jumped, but what caused the rise? 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