Latest 1-Year T-Bill 30 Jan 2024 (BY24100T) Yield Fell to 3.45%: What Caused the Drop?

1-Year T-Bill 30 Jan 2024 (BY24100T)

The auction for the 1-year T-bill BY24100T resulted in a cut-off yield of 3.45%. That is a significant drop from the previous auction, which yielded 3.7%. Ouch! The result may disappoint some investors who expected a more competitive yield before the interest rate reversal that may start to happen this year. What caused the drop, and is the current yield still competitive enough?

 

Auction Result Summary

Allotment Result

Total Amount Allotted S$4.5 billion
Amount Allotted to Non-Competitive Applications S$1.8 billion
Total Amount Applied S$14.4 billion
% of Competitive Applications at Cut-off Allotted Approximately 17%
% of Non-Competitive Applications Allotted 100%
Bid-to-Cover Ratio 3.19

Yield and Price

Cut-off Yield 3.45% p.a.
Cut-off Price 96.559
Median Yield 3.4% p.a.
Median Price 96.609
Average Yield 3.13% p.a.
Average Price 96.879

 

Yield Dropped

T-bill BY24100T auction resulted in a cut-off yield of only 3.45%. With such a significant drop from the previous auction, it is understandable that many investors were left disappointed. But is it really that bad? We may need to zoom out to see where we are historically and see if the current yield is still competitive enough.

T-Bill 30 Jan 2024 (BY24100T) - Historical Chart
Source: Singapore T-bill Interest Rate

From the historical chart above, we can see that the current yield, albeit lower, is still one of the highest in recent years.

The Fed and the market also expect that interest rates will start to reverse this year, and it is understandable that this 1-year T-bill yields lower than the 6-month T-bills. For reference, the latest 6-month T-bill yielded 3.7%.

 

Demand Jumped

We saw a significant jump in the total application amount in this T-bill BY24100T auction. The total application amount was $14.4 billion, much higher than the $11.9 billion we saw in the previous auction.

The higher demand can be attributed to the CPF applicants, who usually prefer longer-duration T-bills to reduce the opportunity cost associated with investing CPF money. We may also see the impact of the interest rate reversal expectation here, with many investors flocking into this 1-year T-bill (BY24100T) to lock in the higher rates for longer.

The jump in demand may be one of the main contributors to the drop in the cut-off yield.

Non-Competitive Bids

Good news to non-competitive bidders: you got full allocation, yay! Because most of the application demand came from competitive bidders, there were enough allocations for all non-competitive bidders in this auction. Congratulations!

 

How Competitive Is This Yield Compared to Alternatives?

As many investors may have failed to secure allocation or were disappointed with this T-bill BY24100T auction result, let us look into some alternatives for this 1-year T-bill.

Fixed Deposits

The most popular alternative is the 12-month fixed deposits. At the time of this writing, the highest 12-month fixed deposit rate is 3.2%, offered by the Bank of China and DBS. If you prefer local banks, DBS offers 3.2%, but only up to $19,999 in deposit amount. If you want to invest a higher amount, you may look at UOB’s offering of 3.1%.

It is pretty clear that fixed deposits, unfortunately, do not offer competitive enough rates to match the latest 1-year T-bill cut-off yield of 3.45%.

Regardless, if you want to apply for fixed deposits, you may refer to our fixed deposit rates in Singapore page.

6-Month T-Bills

Investors may also explore the 6-month T-bills as an alternative. They are shorter in duration but offer a higher yield. The latest cut-off yield for the 6-month T-bill was 3.70%.

With the 6-month T-bills, please note that you will be exposed to the refinancing risks in six months when your T-bills mature. You will need to apply for another T-bill again with the prevailing interest rates at the time of application. Given the anticipated shift in interest rates this year, you may not be able to secure a similar yield in six months.

You may refer to our Singapore T-bills interest rates page to see the historical yield movement of the 6-month T-bills.

Syfe Cash+ Guaranteed

Syfe Cash+ Guaranteed offers 3.5% for a lock-in period of 12 months. This is higher than the cut-off yield in this latest 1-year T-bill. If you are interested in this offering by Syfe, please refer to our list of Singapore cash management accounts to learn more.

Please note that although it behaves very similar to fixed deposits, with guaranteed principal and interest, Syfe Cash+ Guaranteed is considered an investment and, therefore, not subject to SDIC insurance.

 

What Would We Do?

We think the 1-year T-bill is still a decent option for investing our CPF money. As for our cash, we no longer use the 1-year T-bill to park our short-term cash. With the expectation that interest rates will reverse this year, we have migrated most of our short-term cash into Singapore Savings Bonds (SSB) to lock this higher rate for much longer: ten years! SSB also allows monthly redemption, which means it is the more liquid option.

We will continue to use 6-month T-bills to park a smaller portion of our short-term cash to enjoy the higher short-term rates.

What do you think? Are you interested in applying for the next 1-year T-bill? If yes, you may follow our guide on how to buy T-bills.

If you plan on using CPF, you can estimate the additional interest you may earn with our CPF T-bill calculator.

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Disclaimer: The information provided here is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice or recommendation of any sort.

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