1 year T-Bills yields jump to 3.74% – Big drop in demand from investors? Better buy than fixed deposits? (27 July 2023 Auction Results)



In my weekend article I estimated a range of 3.60 – 3.70% for the 1-year T-Bills.


  • The 1 year T-Bills traded at 3.66% on the open market the day before the auction.
  • And the recent 6-month T-Bills auction showed a rebound in investor demand.
  • And the previous 12-month T-Bills auctions all closed at a yield below market price.

The estimated range of 3.60-3.70% was reasonable, even with the benefit of hindsight.

Well, the 1-year T-Bills auction results are out, and you’re looking at a 3.74% yield.

That’s frankly a surprisingly high yield in light of all of the above.

And only 0.11% below the most recent 6-month T-Bills.


1 year T-Bills yields jump to 3.74% (27 July 2023 Auction Results)

I’ve extracted the results below.

Cut-off yield is 3.74%.

The average yield of 3.09% is definitely on the low side, and does suggest a lot of low-ball bids – likely from CPF-OA buyers.

But the median yield is 3.50%, which suggests that leaving out the low-ball bidders, the other bidders were actually quite rational in their bidding.

You can see the cut-off yields for the past few 1-year T-Bills charted below.

Yields have actually gone up from the past 1-year T-Bills auction (which was in April when everyone was expecting Fed rate cuts due to the regional banking crisis).

That’s actually a pretty decent yield, considering most bank 12 month fixed deposits only pay about 3.5%-ish today.

Demand dropped quite a bit from previous 1-year T-Bills auction

Demand dropped quite a bit though.

The 1-year T-Bills received only $9.3 billion in application amounts.

That’s a massive 26% drop from the previous 1 year T-Bills auction in April 2023 ($12.7 billion)

You can see this charted below.

A monster drop in T-Bills application amount – lower than the past 2 auctions.

Why did 1-year T-Bills go up? Was it due to Fed rate hikes?

I know some of you attribute the higher interest rates to last night’s Fed rate hikes.

I mean, you never really know because with financial markets you can never prove that something “caused” something.

But the way I see it, Fed rate hikes are already priced into the market at this point.

This isn’t like late 2022 where the Fed is going to surprise you and raise by 75 bps instead of 50 bps.

Before last night’s rate hike the market was pricing in a close to 100% probability of a Fed rate hike, so it’s really hard to say that it was unexpected.

If indeed the rise in interest rates is due to Fed rate hikes, then this should be reflected in the 1-year T-Bills price on the open market as well.

But the fact that the cut-off yield of 3.74% is quite a bit higher than where the 1-year T-Bills are trading on the open market suggest that this isn’t really due to Fed rate hikes.

My personal view – I think this is just down to auction bidding dynamics.

Demand came in low, and therefore yields went up relative to market price.

Why did demand for 1-year T-Bills go down?

Why demand went down – your guess is as good as mine.

The timing was tricky, because CPF-OA buyers would have lost 2 months of CPF-OA interest, and that might be one reason why demand dropped.

Personally I wrote that the 1-year T-Bills were not an exciting buy for me if I were using cash.

Not when you can get 3.85% on a 6-month T-Bill, or 3.48% on GXS (Grab-Singtel Digital Bank).

Without needing to lock your money up for 12 months and losing that liquidity / optionality.

Perhaps other investors thought the same way as well.

Will we see the same for the nest 6-month T-Bills auction?

There’s actually a 6-month T-Bills auction coming up on 3 August (next week).

It will be interesting to see if this trend holds true there as well – resulting in higher 6 month T-Bills yields.

How do you know if you have been allotted T-Bills?

There are always questions on how do you know if you have been allotted T-Bills.

The easiest way is to check if you have any refund from your bank tonight.

Some banks like OCBC will also issue you a confirmation note (but DBS doesn’t).

Otherwise, I break down the different scenarios below.

If you applied Non-Competitive Bid, you will get 100% allotment of whatever you applied for.

Ie. If you applied $10,000, you get $10,000 worth of T-Bills allotted.

If you applied Competitive Bid, then:

Full allotment if you applied below 3.74%.

75% allotment if you applied 3.74%.

No allotment if you applied 3.75% and above.


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