6-month T-Bills yields drop to 3.75% – Demand for T-Bills soars to record highs (11 April 2024 Auction Results)



In my weekend article, I estimated a yield of 3.75% – 3.85% for the upcoming 6-month T-Bills auction.

Well, the auction results are out – 3.75%, on the lower end of my projected range.

What is interesting is that the demand for T-Bills continues to soar to record highs.

At $16 billion in demand this auction, this is the highest T-Bills demand we’ve seen in 18 months, since interest rates started going up.

So I wanted to take a look at the numbers, to understand what’s driving the move in T-Bills yields?


6-month T-Bills yields drop to 3.75% (11 April 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 3.75% yield (a drop from 3.80% the previous auction).

I’ve charted this in graph form below.

While T-Bills yields are well off the Feb lows, and comfortably back into the 2023 range.

They have dipped slightly from the past 3 T-Bills auctions.

Demand for T-Bills soars to $16.0 billion (from $15.6 billion the last auction)

Demand for T-Bills keeps going up though.

At $16.0 billion in demand for T-Bills, this is the highest demand for T-Bills we’ve seen the past 18 months since interest rates started going up.

Charted below, you can see how T-Bills demand is at record highs – much higher than all of the demand we saw in 2023 / 2024.

Investors just cannot get enough of T-Bills it seems, and it’s not hard to see why with the continued drop in bank fixed deposit rates.

Note that the auction amount of $6.3 billion this auction is actually higher than the $6.1 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? – yet yields go down

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 continued going down the most recent auction.

This suggests that while demand for T-Bills went up a lot, investors are pretty rational with their bidding, and not submitting lowball bids just to get an allotment.

Part of this could also be due to the fact that yields have stabilised around the 3.7% – 3.8% level, so investors have more certainty around where to submit their bids.

What drove the drop in T-Bills yields? (11 April 2024 Auction Results)

For some reason, the market yields on 12-week MAS bills dipped quite sharply on 9 April, the closing date of the T-Bills auction:

It’s not very clear why this was the case, and whatever drove this may have contributed to the drop in yields.

After last night’s hot US inflation data, the market is now only pricing in 2 interest rate cuts in 2024.

This has pretty big implications on interest rates and asset prices going forward, that I will discuss further over the weekend.

However this news only came out on Wed after the close of the T-Bills auction, and was unlikely to have played a part in the drop in T-Bills yields.

So it looks like the drop in T-Bills yields is ultimately due to higher demand, and perhaps a bit of whatever it was that led to the drop in MAS Bills yields.

How do you know if you have been allotted T-Bills? (11 April 2024 Auction Results)

If you applied Non-Competitive Bid, you will get 88% allotment of whatever you applied for (down from 94% the last auction).

Ie. If you applied $100,000, you get $88,000 worth of T-Bills allotted.

If you applied Competitive Bid, then:

Full allotment if you applied below 3.74% and below.

26% allotment (approximately) if you applied 3.75%

No allotment if you applied 3.76% 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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