T-Bills yields drop again to 3.73% – Why are interest rates going down despite falling demand? Better buy than fixed deposits? (17 August 2023 Auction Results)



So the latest T-Bills auction results are out!

In my weekend article, I predicted a range of 3.70% – 3.85% on the T-Bills.

And the actual cut-off yield came in on the lower side of that range at 3.73%.

This is despite (a) application amounts going down, and (b) the sharp rise in long term yields the past few weeks.

So you can’t chalk up the last auction as a freak result anymore – it does look like the recent drop in T-Bills yields is supported by certain underlying factors in play.


T-Bills yields drop to 3.73% (17 August 2023 Auction Results)

I’ve extracted the cut-off yield below.

This round of 6-month T-Bills are issued at 3.73% yield (down from 3.75% the previous auction).

Charted in graph form below.

This is one of the lowest T-Bills yields in the past few months.

Yields are close to March 2023 lows, and continuing the downtrend from the past few auctions.

T-Bills yields are dropping despite rising global and long term interest rates

This is especially interesting when you consider that both global interest rates, and long term interest rates, have marched upwards the past few week.

You can see the US Treasury yields below.

Both the 1 and 2 year yields are close to cycle highs, and have been steady the past few weeks.

At the long end, the 10 year yield has shot up to 4.3% – which has actually surpassed cycle highs.

Here’s the 10 Year Singapore Government Security – at 3.2% it has actually gone up the past few weeks, and not gone down.

So… global interest rates have not changed materially the past few weeks.

In fact the long term interest rates actually went up materially.

Why are T-Bills yields on a downtrend then?

Demand for T-Bills actually went down?

Even more surprising is that demand for T-Bills actually went down this auction.

At $11.8 billion, demand is down 4% from the previous auction ($12.3 billion).

In chart form below, you can see how the demand for T-Bills actually went down this auction.

In fact the amount of T-Bills being offered for auction actually went up too, from $5.5 billion last auction to $5.6 billion this auction.

So supply went up, demand went down, and yet T-Bills yields went down.

This points to a deeper underlying trend behind the drop in interest rates.

Lower yields is due to flight for safety?

If you look at the institutional MAS Bills, you’ll notice a sharp drop in yields in early August, and again this week.

Which foreshadowed the drop in T-Bills yields.

So it suggests that this is not purely a retail investor trend, there is a deeper trend here.

My current theory, is that for some reason there is a flight to safety for Asian investors.

Why exactly that is the case is not so clear.

The most obvious catalyst would be the contagion fears arising out of China.

Notably Country Garden missed out on their bond payments earlier this month, and one of China’s largest private wealth managers also missed payments on its investments products. All while economic data paints a gloomy picture of the economic health in China.

Perhaps investors are moving their funds into the safety of Singapore T-Bills during this period.

Explaining the sharp divergence in Singapore yields vs US yields.

Whether I am correct on this I don’t know for certain.

But I would love to hear alternative theories in the comments below.

Are T-Bills still a good buy with dropping yields?

Full disclosure that I applied for T-Bills as well, but as I submitted a competitive bid I didn’t get any.

At 3.73% – are T-Bills still worth buying?

Considering that the best fixed deposit only pays 3.55%, I suppose T-Bills yields are still superior.

But the gap has definitely narrowed.

And I think a case could be made for using other products like money market funds or Singapore Savings Bonds now, instead of purely T-Bills.

I’ll take a closer look in the coming weeks and share further thoughts on this.

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

There are always questions on how do you know if you have been allotted T-Bills.

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).

Otherwise, I break down the different scenarios below.

If you applied Non-Competitive Bid, you will get 100% allotment of whatever you applied for.

Ie. If you applied $10,000, you get $10,000 worth of T-Bills allotted.

If you applied Competitive Bid, then:

Full allotment if you applied below 3.73%

23% allotment if you applied 3.73%

No allotment if you applied 3.74% and above.

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  1. Hi, I applied for $20K T-bills in the latest auction and was successful. Yield was 3.73%. But I was refunded $372 only. Shd it have been $373? Thank you.


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