The auction for T-Bill BS24108V has concluded, and the cut-off yield was 3.74%. This yield was decent, though it has declined since we hit 3.8% earlier this month. Did you get your allocation? Let’s look into this auction result.
Auction Result
Here is the T-bill BS24108V auction summary:
One notable thing about this auction is the larger offering of $6.6 billion, slightly higher than the $6.3 billion in the previous auction.
Yield Declined But Stable
Despite the decline from the previous auction, the latest yield of 3.74% is relatively stable, as we have been ranging in this area since 2023. Here is the historical 6-month T-bill yield chart:
The chart above shows that the current yield is still one of the highest in recent years. It’s amazing that back in early 2022, we still saw a sub-1% yield! Wow, that’s how fast the interest rate has climbed.
The Fed has projected that we have reached the peak of this interest rate hike cycle and that it will start to reverse soon, towards the end of this year. This projection opens up a potential opportunity for us to lock in higher rates. What do you think? Do you agree with their assessment? If you believe rates could reverse later this year, this could be your chance to seize the higher rates.
Demand Still High But Finally Moderated
One major trend we have been monitoring is the high demand for T-bills in recent auctions. The good news is that the demand has finally moderated in this T-Bill BS24108V auction. The total application amount stood at $14.4 billion, a significant drop from the $16 billion we witnessed in the previous auction. Despite the drop, the demand is still relatively high, and this could be driven by the investors’ perception that the high interest rates may not last much longer, and these few months could be their opportunity to lock them in for longer.
Non-Competitive Bids
Again, there was still relatively high demand from non-competitive bidders, so the cap was again hit. Non-competitive bidders got 96% of their desired allocation, which is still respectable. We have monitored these non-competitive bids for a while, and this trend seems to persist. Hopefully, with the declining demand in this auction, this trend can also moderate in future auctions. However, in the upcoming auction, we will still stick with competitive bids to ensure we can get our desired allocation.
T-Bills Alternatives
What alternatives can we consider if we do not get our desired allocation in this T-Bill BS24108V auction?
The most popular alternative is fixed deposits. In recent months, fixed deposits in Singapore have seen relatively unattractive rates as the highest rates offered are much lower than what T-bills can offer. As of this writing, the highest 6-month fixed deposit is offered by CIMB Bank for 3.25%. You can get up to 3.3% if you are their preferred banking client. Regardless, these offerings are not attractive.
Another alternative is cash management accounts that offer guaranteed rates. As of this writing, Syfe Cash+ Guaranteed offers 3.75% for its 6-month lock-up period, which is as competitive as the latest T-bill yield. Please note that SDIC does not insure you with cash management accounts because they are considered investments. If you can accept the additional risks, you may consider this alternative if you did not manage to get your T-bill allocation.
What Would We Do?
We have been utilizing T-bills to park our short-term cash and will likely continue if short-term interest rates remain elevated. However, with the expectation that we may be reversing soon towards the end of this year, we have started to migrate some of our T-bills allocation into Singapore Savings Bonds (SSB) to lock in these higher rates for much longer, up to ten years! Additionally, SSB also allows monthly redemption, making your cash much more liquid than T-bills.
If you are interested in applying for the next T-bill auction, you may follow our guide on how to buy T-bills.
If you plan to apply with CPF, you can estimate the additional interest you may earn using our CPF T-bill calculator.
