6-month T-Bills yields stabilise at 3.74% – But demand for T-Bills jumps (20 June 2024 Auction Results)

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In my weekend article, I estimated a yield of 3.65% – 3.80% for the upcoming 6-month T-Bills auction.

The auction results are out at 3.74% cut off yield, right smack in the middle of my protected range.

These are actually pretty strong results (for investors looking for yield).

Because the demand for T-Bills jumped quite noticeably in this auction, and auction supply fell quite a bit – and yet yields stabilised around the 3.7% – 3.8% range.

Let’s dive into the numbers.

    

6-month T-Bills yields stabilise at 3.74% (20 June 2024 Auction Results)

The cut-off yield for the latest T-Bills auction is set out below.

This round of 6-month T-Bills is issued at 3.74% yield (which is only down slightly from the 3.76% we saw in the previous auction).

T-Bills yields since Jan 2023 are charted in graph form below.

You can see how with the past 2 auctions, T-Bills have gone back into the 3.7 – 3.8% range.

This makes the T-Bills auction in late May where yields fell to 3.65% look like an outlier (for now)

Demand for T-Bills rises to $15.5 billion (vs $14.2 billion the last auction)

Demand for T-Bills this auction came in at $15.5 billion.

This is a 9.2% jump in demand vs the $14.2 billion we saw in the previous auction.

You can see this charted below – demand for T-Bills has recovered to close to record highs.

Some of you have suggested than when there is an auction with a high cut-off yield (like the last auction where T-Bills closed at 3.76%).

We see higher demand the next auction.

There’s no way to confirm this conclusively, but indeed we do see a jump in demand this auction.

Auction amount for T-Bills dropped to $6.6 billion (vs $7.1 billion the previous auction)

It’s important to note that the T-Bills auction amount dropped quite sharply this auction.

Only $6.6 billion of T-Bills on offer, which is 7% lower than the last auction ($7.1 billion).

Higher demand, lower supply, and yet no sharp drop in T-Bills yields.

This was pretty surprising.

More low-ballers for T-Bills? Based on Bid data?

It gets more interesting when you look at the bidding data.

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 how spreads actually rose in the most recent auction, indicate more low ball style bids from investors.

Why did T-Bills yields stabilise at 3.74%? If demand went up and supply went down?

Putting everything together.

At this auction we see:

  1. Higher demand for T-Bills
  2. Lower supply of T-Bills
  3. More “lowball” bidding

And yet yields stabilised at 3.74%.

This suggests that had the auction amount been higher at $7 billion+, we might have seen an even bigger jump in yields.

Interestingly if you look at market pricing on the MAS Bills or 6-month T-Bills, neither is showing a sharp change in market interest rates.

So again, it looks like most of this is being driven by auction dynamics rather than anything fundamental.

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

If you applied Non-Competitive Bid, you will get 83% allotment of whatever you applied for (down from 91% the last auction).

Basically – If you applied $100,000, you get $83,000 worth of T-Bills allotted.

If you applied Competitive Bid, then:

Full allotment if you applied below 3.73% and below.

46% allotment (approximately) if you applied 3.74%

No allotment if you applied 3.75% 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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This article was written on 20 June 2024 and will not be updated going forward.

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