We just got the auction result for T-bill 31 Oct 2023 (BS23121E), and the cut-off yield was 3.95%. Yay! This is good news for investors as the yield rebounded strongly from 3.87% in the previous auction. What could be driving the higher yield? Let’s see the auction result.
How Was The Auction Result?
Here is the summary of the auction:
Allotment
| Total Amount Allotted | S$5.7 billion |
| Amount Allotted to Non-Competitive Applications | S$2.2 billion |
| Total Amount Applied | S$11.5 billion |
| % of Competitive Applications at Cut-off Allotted | Approximately 84% |
| % of Non-Competitive Applications Allotted | 100% |
| Bid-to-Cover Ratio | 2.02 |
Yield and Price
| Cut-off Yield | 3.95% p.a. |
| Cut-off Price | 98.03 |
| Median Yield | 3.77% p.a. |
| Median Price | 98.12 |
| Average Yield | 3.6% p.a. |
| Average Price | 98.205 |
Source: MAS
The cut-off yield in this T-bill 31 Oct 2023 (BS23121E) auction is quite attractive as it bounced strongly to 3.95%. At close to 4%, we are back to the upper range we have seen this year. We can see that this current yield is one of the highest in recent times.
What could be driving the higher yield that we saw in this auction?
Lower Demand
This auction offered a higher amount of $5.7 billion, up from $5.4 billion in the previous auction. However, the total amount applied dropped significantly from $14.7 billion to $11.5 billion.
We also saw the non-competitive bid amount stayed at $2.2 billion. The good news is that because of the higher total allotted amount, the 40% allocation was not hit in this auction, and therefore, all non-competitive bidders got their full allocation.
The amount of non-competitive bids is still dangerously close to the allocation limit, so we will continue to monitor going forward. We will also use competitive bids in the next auction to ensure we can get our desired allocation.
The higher amount offered and the lower demand contribute to the higher cut-off yield achieved in this auction.
Loss of Additional CPF Interest
What could be driving the lower demand? The unfavorable period for this T-bill may cause a potential loss of additional CPF interest; therefore, this T-bill 31 Oct 2023 (BS23121E) was likely not favored by CPF bidders.
The lower interest from the CPF bidders may be one factor that contributes to the lower demand we saw in this auction.
What Would We Do?
We like that the T-bill has consistently stayed within the current range between 3.7 and 4%. This latest one is at the higher end of the range we have seen this year. At 3.95%, it is also very competitive compared to alternatives such as fixed deposits and cash management accounts. We also like that T-bill allows us to lock in the interest for the next six months with a guaranteed payout. We will likely continue to utilize T-bills to park our short-term cash needs to benefit from this higher yield.
As we believe that we are nearing the end of this rate hike cycle, we would also like to lock in the longer-term yield offered by Singapore Savings Bonds, which also provides attractive long-term rates.
What do you think? Did you get an allocation in this T-bill auction?
Would you like to apply for the next T-bill auction? If you intend to use CPF, you may use our CPF T-bill calculator to estimate how much more interest you may earn by investing in T-bills.
Additionally, we have written a comprehensive guide about Singapore T-bills and how to buy T-bills.
