Latest T-Bills issued at 4.20% yield – Why are interest rates going down? (5 January 2023 Auction Results)



The latest T-Bills auction results are out!

Unfortunately, the yield came in a bit lower than expected.

In my weekend article I estimated fair value of 4.3% – 4.4% for the T-Bills.

Final cut off yield came in at 4.20%, which is definitely on the lower end of the spectrum here.


5 January 2023 T-Bills Auction Results – 4.20% yield

Full numbers extracted below.

Cut-off yield is 4.20%.

So everyone will get T-Bills at 4.20% regardless of whether you applied competitive or non-competitive bids.

Allotment Results for 5 January 2023 T-Bills – Full Allotment for non-competitive bids

Non-competitive applications see a full 100% allotment again, same as the previous round.

Practically speaking, this means that:

If you applied non-competitive, you get 100% allotment of whatever amount you applied for (at 4.20%).

If you applied competitive below 4.20%, you get 100% allotment (at 4.20% yield).

If you applied competitive at 4.20%, you get 27% allotment.

If you applied competitive above 4.20%, you get nothing.

More low ballers this time around?

The auction received $12 billion in applications this time around, higher than the previous auction (which was $11.8 billion).

That said, the issue size this time was $4.7 billion, larger than previous auction’s $4.4 billion.

Interestingly though, the bidding statistics are very similar to the previous round.

Median yield at 4% is the same as the previous round.

Average yield of 3.77% is very similar to previous round’s 3.76%.

Seems like most of the bids are very similar to last auction, with a small downward bias.

This is slightly surprising because if you look at the interest rate trend, it’s actually been creeping upwards.

Some possible reasons I can think of are:

  1. Many investors were away in Dec and missed the previous auction – so they made up for it by bidding this time around
  2. Many investors used CPF-OA to buy, and with CPF you want to bid lower to ensure allotment (instead of wasting your time queuing at the bank)
  3. Investors are afraid of interest rates going down, and want to lock in rates now

But frankly, your guess is as good as mine here, and if you have any other theories please feel free to share below.


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What did I apply for this round of T-Bills?

Personally I applied for 4.30% for this T-Bill auction, so I had zero allotment.

Funny because I’ve been applying 4.30% for the past 2 T-Bills auctions and have missed both times.

Although that said, at 4.20% I don’t see a big need to buy T-Bills, because I can easily just place it into a 4.20% fixed deposit instead.

With Fixed Deposits I have the option to break early, and can lock in up to 18 months if I want.

Next T-Bills on 11 Jan (and 17 Jan for 12 month T-Bills)

The next 6-month T-Bill will open on 11 Jan, so even if you missed out on this round of T-Bills you can try again next week.

FYI there’s also a 12 month T-Bill coming on 17 January.

12 month T-Bills are quite rare, there’s only 1 each quarter.

So for those who want to lock in their money for a year (especially for CPF-OA applications to avoid losing a month of CPF-OA interest) – this will be a big one to watch out for.

Will share my views on the estimated yields for both closer to the auction date!


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