6-month T-Bills yields drop to 3.70% – Demand for T-Bills jumps to record highs (9 May 2024 Auction Results)



In my weekend article, I estimated a yield of 3.70% – 3.80% for the upcoming 6-month T-Bills auction.

Well, the auction results are out at 3.70% cut off yield, right on the bottom of my projected range.

To be fair though, latest US economic data came in slower than expected, raising market hopes for 2 interest rate cuts in 2024.

So this would have impacted T-Bills yields on the downside.

At the same time – T-Bills demand jumped to record highs at $16.3 billion (vs $14.4 billion the previous auction).

This is the highest T-Bills demand we have seen since 2022.

Let’s take a deeper look at the numbers.


6-month T-Bills yields drop to 3.70% (9 May 2024 Auction Results)

I’ve extracted the cut-off yield for the latest T-Bills auction below.

This round of 6-month T-Bills are issued at 3.70% yield (a drop from 3.74% the previous auction).

This is charted in graph form below.

You can also see how T-Bills yields have generally stabilised around the 3.7 – 3.8% range the past 6 auctions.

However – there does look to be a downtrend in place for the past 3 T-Bills auctions.

Demand for T-Bills jumps back up to record highs at $16.3 billion (from $14.4 billion the last auction)

Demand for T-Bills jumps back up to record highs.

We’re seeing a massive $16.3 billion in T-Bills applications, which is up 13% from the previous auction ($14.4 billion).

Charted below, you can see how T-Bills demand has gone back up to record highs since 2002.

This is especially after the sharp drop in demand the past auction.

Given the fact that banks are cutting interest rates across the board, I suppose this isn’t that surprising.

While auction amount for T-Bills goes up to $6.8 billion (vs $6.6 billion the previous auction)

Note that the auction amount of $6.8 billion this auction is actually higher than the $6.6 billion the previous auction.

So the fact that the cut-off yields went down despite the higher auction amount is notable.

This suggests that had auction amounts not gone up, we might have seen a bigger drop in T-Bills yields.  

Less lowballers, more rational bidding 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 have actually stabilised for the past 4 auctions.

However it jumped quite notably in the most recent auction.

Why this is the case is not very clear though, especially since with the stabilisation in yields, there really is no reason to submit a low-ball bid.

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

If you applied Non-Competitive Bid, you will get 81% allotment of whatever you applied for (down from 96% the last auction).

Ie. If you applied $100,000, you get $81,000 worth of T-Bills allotted.

If you applied Competitive Bid, then:

Full allotment if you applied below 3.69% and below.

26% allotment (approximately) if you applied 3.70%

No allotment if you applied 3.71% 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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