Oh well, the latest T-bill BS24107N auction’s result was slightly disappointing. The cut-off yield was 3.75%, down from 3.80% in the previous auction. What do you think? Let’s look further into this auction result.
Auction Summary
Let’s see the summary of this auction result:
Lower Yield
The cut-off yield for the T-bill BS24107N auction was 3.75%. Despite the drop, 3.75% is still a competitive yield, considering the level we have been ranging throughout 2023 and 2024.
The historical yield chart above shows that this latest cut-off yield is still one of the highest in recent years. Remarkably, the figure was still under 1%, even in early 2022.
With the Fed and the market expecting rates to start reversing toward the end of this year, this could be your chance to lock in this higher yield for a while longer.
Demand Continued to Rise
One of the surprises we saw in this auction is the even higher demand. This T-bill BS24107N witnessed a total application amount of $16 billion, even after a red-hot demand of $15.4 billion in the last auction. This very high demand may be one of the main reasons for the lower cut-off yield in this auction.
With the previous auction yielding 3.80%, a very competitive offering compared to other alternatives, it was unsurprising that more investors were interested in T-bill offerings.
Non-Competitive Bids
We also saw non-competitive bids hit the cap once again. Non-competitive bidders only got 88% of their desired allocation in this auction. We have seen this trend of higher demand for non-competitive bids in the past several auctions, and there is a good chance this trend will continue in the short term. As such, we will continue to utilize competitive bids in the upcoming auctions to secure our desired allocation.
T-Bill Alternatives
The most popular alternative to T-bills is fixed deposits. As of this writing, CIMB Bank offers the highest 6-month fixed deposit rate at 3.25%. If you are their preferred banking client, you can get up to 3.30%. Regardless, this offering is much lower than what T-bills can offer recently.
Another popular alternative is Syfe Cash+ Guaranteed, which currently offers 3.80% for a 6-month locking period. This is as competitive as T-bills. Although Syfe Cash+ Guaranteed’s underlying instrument is fixed deposits, SDIC insurance does not cover it as it is considered an investment product. If you cannot secure your T-bill allocation, you might consider this alternative if you are willing to accept the associated risks.
What Would We Do?
T-bills continue to offer a competitive yield among all other short-term fixed-income alternatives. With this latest yield of 3.75%, it is still one of the best places to park our short-term cash. We will continue to utilize T-bills to park our short-term cash and enjoy this higher yield while it lasts.
Additionally, we have migrated some portions of our short-term cash allocation into Singapore Savings Bond (SSB) to lock in the higher rates for much longer (up to 10 years!). With the Fed and the market expecting rates to reverse this year, we would like to prepare for this reversal by locking these higher rates and enjoying them for the next ten years.
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.
