What happened
The next 6-month Singapore T-bill auction (BS24119S) will be coming up on 26 September 2024.
I have seen some discussion in the Beansprout community on whether Singapore T-bill yield will fall further after the cut-off yield for the previous 6 month T-bill dived to 3.10%.
Many were especially keen to find out if we will see a sharp decline in the T-bill yield after the US Federal Reserve made a big interest rate cut of 0.5% this week.
Let us look at the latest indicators to find out if it might still be worthwhile applying for the T-bill.
Will the T-bill yield fall further in the auction on 26 September?
#1 – US bond yields have stabilised after Fed rate cut
US government bond yields have dived in recent weeks, as easing inflation has led to increasing confidence amongst investors that the US Federal Reserve will start to cut interest rates in September.
In fact, after the most recent rate cut, investors are now expecting the Fed to cut interest rates by a total of 1.0% (or 100 basis points) by the end of 2024, according to the CME Fedwatch Tool.
As a result, the US 10-year government bond yield has fallen to a low of about 3.7% from a recent high of above 4.45% at the start of July, and is hovering near its low since the middle of last year.
However, we note that it has stabilised and rebounded slightly following the Fed interest rate cut this week.
Likewise, the US 1-year government bond yield has fallen to about 4.0% from about 4.4% in late August, and is near its lowest level since the collapse of Silicon Valley Bank in early 2023. However, it has not declined further after the Fed interest rate cut.
#2 – Singapore government bond yields have fallen too
With the fall in US government bond yields, Singapore government bond yields have fallen sharply in recent weeks.
The Singapore 10-year government bond yield declined to a low of 2.41% on 17 September from a high of 3.1% in the middle of July. However, it has rebounded slightly to 2.47% following the Fed rate cut.
The closing yield on the 6-month T-bill was 3.07%, on 19 September, falling slightly further from the cut-off yield of 3.10% in the previous T-bill auction on 12 September.
To get an indication of the yields for shorter-maturity Singapore government bonds, we can also refer to the yield on the 3-month MAS bill.
The cut-off yield was at 3.23% in the auction on 17th September, lower than the cut-off yield of 3.30% in the auction on 10th September and 3.72% in the auction on 30th July.
#3 Slightly smaller issuance size compared to the previous auction
The issuance size of the upcoming 6-month Singapore T-bill will decrease slightly to $6.8 billion from S$6.9 billion in the previous auction.
We saw a decline in the amount of T-bill applications to S$13.4 billion in the auction on 12 September from S$16.0 billion in the auction on 29 August.
Should applications for the T-bill continue to decline, we may see the cut-off yield for the T-bill yield being supported. 
What would Beansprout do?
Singapore T-bill yields and US government bond yields have fallen sharply in recent weeks in anticipation of the Fed rate cut.
However, we have not seen a significant further decline following the Fed rate cut.
As of 19 September 2024, the closing yield on the 6-month Singapore T-bill was at 3.07%.
For cash investors, the closing yield on 6-month Singapore T-bill is now below the best 6-month fixed deposit rate of 3.20% p.a.
We would also consider other instruments that allow us to earn a potentially higher yield compared to the T-bill now.
For CPF investors, the closing yield is still slightly above the breakeven cut-off yield for CPF-OA funds.
You can find out how much more interest you can potentially earn on the Singapore T-bill using our CPF-T-bill calculator.
It is also worth noting that the cut-off yield for the T-bill auction will eventually depend on the applications that are submitted, and global bond yields remain volatile.
With the volatility, we can also consider making a competitive bid for the T-bill to make sure that we do not end up with a lower than expected yield.
The 6-month Singapore auction will be held on 26 Sep. We would need to put in our cash applications for the T-bill by 9pm on 25 Sep (Wed).
Applications for the T-bill using CPF-OA will close 1-2 business days before the auction date, and the dates differ across the three local banks.
- Applications for T-bills online using CPF OA via DBS close at 9pm on 25 Sep (Wed). Read our step-by-step guide to applying via DBS.
- Application for T-bills online using CPF OA via OCBC close at 9pm on 25 Sep (Wed). Read our step-by-step guide to applying via OCBC
- Applications for T-bills online using CPF OA via UOB close at 9pm on 24 Sep (Tue) Read our step-by-step guide to applying via UOB.
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