T-Bill 12 Dec 2023 (BS23124S) Result: Yield Declined to 3.74%

The auction result for T-Bill 12 Dec 2023 (BS23124S) has been released: the cut-off yield was 3.74%. This is a slight decline from the previous auction, which yielded 3.80%. What could be driving the lower yield?

Auction Summary

Allotment

Yield and Price

Source: MAS

Declining Yield

The yield for T-Bill 12 Dec 2023 (BS23124S) decreased to 3.74%. This may disappoint investors as we have been used to the relatively high yields in the past auctions. But let us put things in perspective by showing the chart of T-bill historical interest rates.

This latest yield of 3.74% actually falls within the range we have seen throughout most of this year. Granted, it is a slight decline from the local top we saw in October 2023 at >4%, but overall, the current yield is decent. Despite the decrease, if we compare it to the yield we saw in early to mid-2022, the current yield is still pretty competitive.

Higher Demand

We saw an even higher demand in this auction for T-Bill 12 Dec 2023 (BS23124S). The total application amount was $13.3 billion, up from $13 billion from the previous auction.

The non-competitive application amount jumped to $2.4 billion, much higher than the previous auction amount of only $2.2 billion. This is unfortunate because the non-competitive application amount exceeded the quota, which means that eligible non-competitive bidders could only receive a 95% allocation.

We have monitored this non-competitive bid amount for a while and always preferred to bid competitively to avoid this quota issue. Going forward, we will continue to use competitive bids to ensure we can get our desired allocation.

Declining Interest Rates

Interest rates have declined this month following the steady moderation in CPI and Core CPI readings. We can see in the chart below that since Q4 2022, the readings have shown a consistent decline. Albeit a bit sticky, we seem to be on track to reach the target inflation rate of 2% in the coming years.

The Fed has also paused its rate hike in its last two meetings. The market has even been more aggressive, pricing in rate cuts starting around the 2nd quarter of 2024.

With the interest rates expected to start reversing soon, it is unsurprising that the Singapore T-bill interest rates also moderate.

Despite the trend of lower interest rates, in our opinion, this latest yield of 3.74% is still competitive and in line with what we have been getting most of this year. If you want to lock in this higher yield for the next six months, the next auction may be your chance to fill in your desired allocation.

What Would We Do?

Despite the slight dip, we think T-bills still provide very competitive rates compared to other alternatives, such as fixed deposits, high-yield savings accounts, and cash management accounts. High-yield savings and cash management accounts have floating interest rates, which is not ideal if you believe the interest rates may be reversing soon. Fixed deposits can lock the rates for a fixed duration, but the rates are currently not competitive compared to T-bills.

As such, we will continue to utilize T-bills for our short-term cash needs. At the same time, we also want to lock in the higher interest rates for longer, and therefore, we have migrated some of our T-bills allocation into Singapore Savings Bond. SSB allows us to lock the rate for the next ten years, which is desirable if you believe the interest rates may be reversing soon. The plus point is that SSB is even more liquid than T-bills, allowing monthly withdrawal without penalty while still earning the accrued interest.

So, did you get your desired allocation in this T-Bill 12 Dec 2023 (BS23124S) auction? If you want to apply for the next auction, you may follow our guide on how to buy T-bills.

If you plan to apply using CPF, you may use our CPF T-bill calculator to estimate the additional interest you may earn by investing in T-bills.

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