We got the auction result for T-bill BS24103H, and the good news is that the cut-off yield rebounded strongly to 3.66%! After a steep decline in the previous auction, it is a relief that the yield rebounded again. Congrats to everyone who got their allocation! What drove the higher yield?
Auction Summary
Here is the summary of the T-bill BS24103H auction result:
Yield Rebounded Strongly
After a downward trend in the past several auctions, this T-bill BS24103H auction result gave investors a bit of a relief. The cut-off yield jumped to 3.66%, a respectable level considering the previous auction of ‘only’ 3.54%.
The historical 6-month T-bill yield chart above shows that we are now back to the bottom range of where we have been ranging throughout 2023. And if we zoom out further, we can see that the current level is still among the highest in recent years. That’s a pretty good yield!
What could have caused the rebound?
Demand Dropped
We saw a drop in demand in this T-bill BS24103H auction. The total amount applied was $13.5 billion, down from $14.6 billion in the previous auction. Whew, that’s $1.1 billion less! Although most of the drop in demand came from competitive bids, we also saw a drop in non-competitive bids from $2.2 billion to $2.0 billion in this auction. With the non-competitive bids still being lower than the allocation limit, all non-competitive bidders received their full allocation. Congrats!
It is also worth noting that the total available allotment amount was higher in this auction at $6.6 billion, up from $6.3 billion in the previous auction.
The combination of the higher allotment amount and the significantly lower demand could have been one of the main driving factors for the rebound.
Market Rates Projection
Those who follow recent news may be aware of the persistent nature of inflation. Here is the historical US CPI and Core CPI data:
The most recent CPI data shows a significant decline from its peak in June 2022. However, it remains higher than the long-term target of 2%, indicating a persistent elevation in inflation. The CPI and Core CPI have plateaued at around 3% and 4%, respectively.
Because of the sticky inflation, the market expects the Fed to delay the initial rate cuts to the second half of this year. Previously, the market expected the rate cut to start in March!
This shifting market expectation on the rate cuts timeline might be another driving factor influencing the rebound in the yield. As the market participants expected the rates to stay elevated for longer, there was no rush to lock in the rates now, psychologically allowing them to bid more competitively.
T-Bill Alternatives
Fixed Deposits
With the rebound in the T-bill BS24103H auction, the T-bill yield is now higher than the highest 6-month fixed deposit offering. Currently, the highest 6-month fixed deposit rate is 3.50% from CIMB (or 3.55% if you are their preferred banking client). Therefore, it is fair to say that T-bills are more competitive than fixed deposits.
If you want to check the latest fixed deposit rates across the major banks in Singapore, you can check our coverage on the best fixed deposit rates in Singapore.
Cash Management Accounts
Another alternative to T-bills is the cash management accounts, especially those with guaranteed payouts. They are similar to regular fixed deposits, except that they have no SDIC insurance.
We can look into Syfe Cash+ Guaranteed and StashAway Simple Guaranteed for guaranteed cash management solutions. At the time of this writing, both of them offer 3.6% for their 6-month locking period. The 3.6% offerings are closely aligned with the most recent T-bill yield and, therefore, can become competitive alternatives to T-bills.
If you did not get the latest T-bills allocation, you could consider investing in these cash management accounts, given that you can accept their inherent risk. Otherwise, we still think of T-bills as the more competitive offering.
What Would We Do?
We are pleased with the result of this T-bill BS24103H auction. The strong rebound was a relief after a trend of declining yields in the past several auctions. We like T-bills for parking our short-term cash needs and will continue to utilize them in the short term. However, with the interest rate expected to reverse this year, we have migrated some of our short-term cash needs into Singapore Savings Bonds (SSB) to lock in the higher rates for much longer while still giving us liquidity from its monthly redemption.
So, did you get your T-bills allocation in this auction?
If you are interested in applying for the next T-bill, you may follow our guide on how to buy T-bills.
If you plan to apply using CPF, you can estimate the additional interest you may earn with our CPF T-bill calculator.
