In my weekend article, I estimated a range of 3.35% – 3.50% on the 6-month T-Bills.
The final cut-off yield is out at 3.34% – right below the lower end of my range.
Auction bidding data shows a:
- Drop in demand for T-Bills
- Less low-ball bids
And yet yields continue to slide.
Is this driven by fundamentals (market expectations over lower interest rates) or just low-ball bidding?
Let’s take a closer look at the auction statistics.
6-month T-Bills yields drop to 3.34% (15 August 2024 Auction Results) (BS24116E 6-Month T-bill)
Cut-off yield for the latest T-Bills auction below.
At 3.34%, this continues the slide from the previous auction (3.40%).
I’ve plotted in chart form the T-Bills cut-off yields since Jan 2023.
You can see the massive drop in yields the past 2 auction.
This takes T-Bills yields to well below the lowest yields we’ve seen the past 1.5 years.
Demand for T-Bills falls to $16.0 billion (vs $18.0 billion the last auction)
Demand for T-Bills fell quite sharply in this auction though.
$16.0 billion in T-Bills application.
That’s a 11% drop from the previous auction, and actually quite notable.
Auction amount for T-Bills increases to $6.9 billion (vs $6.8b the previous auction)
On top of that, the amount of T-Bills on offer this auction was $6.9 billion, up slightly from $6.8 billion the previous auction.
This means that T-Bills supply is up, and demand is down – and yet T-Bills yields continued to drop.
This does suggest that the move is largely fundamental driven, and not so much being one-off to this auction.
Auction bidding data indicates less low-ballers for T-Bills?
The spread between the median and average yield tells you how many “low-baller” bids there were.
To illustrate what this is:
Imagine you have 100 bids.
The median yield is if you arrange all the bids from small to high, and take the yield of the 50th bid.
While average yield is adding up the yields of all 100 bids and dividing by 100.
So average yields are skewed by lowball bids, while median yields are not.
To put it simply – the bigger the spread between the median yield and average yield, the more “low-ballers”.
You can see below how the spread actually went down in the most recent auction.
So you can’t really blame this on low-ball bids, the data does not suggest a sharp increase in low-ball bids.
Why did T-Bills yields drop to 3.34%?
At this auction we see:
- Lower demand for T-Bills
- Higher supply of T-Bills
- Less “lowball” bidding from investors
So frankly it looks like the drop in T-Bills yields is driven by fundamental reasons (market expectations of more interest rate cuts in 2024, and increase in demand).
Market is pricing in a whopping 5-6 interest rate cuts over the next 6 months, so you can kind of see why there is such a sharp drop in interest rates.
Did I get any T-Bills?
As shared in the weekend article, I applied for the 6-month T-Bills using a competitive bid.
I did not submit a competitive bid below 3.34%.
So I did not get any allocation of the T-Bills.
At 3.34% – I don’t think the T-Bills are an amazing buy (unless you’re using CPF-OA).
If you’re buying in cash, options like Fixed Deposit or Money Market Funds are pretty competitive.
How do you know if you have been allotted 6-month T-Bills for this Auction?
If you applied Non-Competitive Bid, you will get 100% allotment of whatever you applied for (same as the last auction).
If you applied Competitive Bid, then:
Full allotment if you applied below 3.33% and below.
30% allotment (approximately) if you applied 3.34%
No allotment if you applied 3.35% and above.
If you forgot what you bid, 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).
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