In my weekend article, I anticipated a further drop in T-Bills yields due to high demand and market expectations on interest rate cuts.
My target yield range was 3.60 – 3.75%.
The final auction results are out at 3.64% cut off yield.
While this is within my projected range, it is definitely lower than the previous auction (3.70%) – and continues a downtrend for the past 4 T-Bills auctions.
Let’s take a closer look at auction data.
6-month T-Bills yields drop to 3.64% (18 July 2024 Auction Results) (BS24114V 6-Month T-bill)
The cut-off yield for the latest T-Bills auction is set out below.
This round of 6-month T-Bills is issued at 3.64% yield.
This is down from the 3.70% cut-off yield at the previous auction.
I have charted the T-Bills cut-off yields since Jan 2023 below.
You can see how after the rebound to 3.76% 4 auctions ago.
T-Bills yields have been on a clear downtrend for the last 4 auctions.
Current yields of 3.64% is close to the lowest it has been in all of 2024 (the lowest being 3.54% in Feb 2024).
Demand for T-Bills rises to $15.7 billion (vs $15.6 billion the last auction)
Demand for T-Bills continues to go up, despite being close to record highs.
Total application amounts came in at $15.7 billion.
This is slightly higher than the $15.6 billion at the previous T-Bills auction.
You can see this charted below – T-Bills demand is close to the highest it has been in the past 18 months.
Despite the drop in yields, T-Bills yields are still very attractive vs fixed deposit rates, which is why you see T-Bills demand stay high.
Auction amount for T-Bills went up to $6.8 billion (vs $6.5 billion the previous auction)
Note that the lower yields comes despite the fact that T-Bills supply went up this auction.
We see a total of $6.8 billion of T-Bills on offer, up from $6.5 billion the previous auction.
This isn’t a good sign for T-Bills yields going forward – as it suggests that had auction amounts stayed flat, we may have seen an even larger drop in T-Bills yields.
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”.
Spreads went down slightly this auction, indicating less low-ballers.
Despite all that though, T-Bills yields continued their fall to 3.64%.
Why did T-Bills yields drop to 3.64%? BS24114V 6-Month T-bill
To sum it up.
At this auction we see:
- Slightly higher 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), rather than anything specific to this auction.
Again not a good sign – suggests a further downtrend in T-Bills yields going forward.
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 82% allotment of whatever you applied for (up from 70% the last auction).
Basically – If you applied $100,000, you get $82,000 worth of T-Bills allotted.
This is up from 70% the previous auction, suggesting that some bidders did indeed switch from non-competitive to competitive.
If you applied Competitive Bid, then:
Full allotment if you applied below 3.63% and below.
83% allotment (approximately) if you applied 3.64%
No allotment if you applied 3.65% 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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