T-Bills yields drop further to 3.75% – Why are interest rates dropping while demand is flat? Better buy than Fixed Deposits? (3 August 2023 Auction Results)



So the latest T-Bills auction results are out!

And I must say I was quite surprised by the results.

Because even though US and global interest rates have been going up the past week or two.

The T-Bills yields actually dropped even further to 3.75% (from 3.85% the previous auction).

Why was this the case?


T-Bills yields drop to 3.75% (3 August 2023 Auction Results)

You can see the cut-off yield below.

You’re looking at 3.75% yield.

Charted in graph form below.

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

Which is especially surprising when you consider the uptrend in US interest rates the past few weeks, with both the 2 year and 10 year close to cycle highs.

In fact the 10 Year just broke 4.0% last week, and is sitting at 4.15% today.

So the drop in T-Bills yields is especially surprising in light of this.

Did demand for T-Bills go up massively?

Interestingly, demand at $12.3 billion didn’t even go up that much.

In graph form below, you can see how the $12.3 billion in T-Bills demand is less than 1% higher than the previous auction.

So you can’t even say that yields went down because of significantly higher demand.

So… low yields is because of low ball bidders?

Diving deeper into the numbers.

The median yield for this auction is 3.64%, while average yield is 3.17%.

Whereas the median yield for the previous auction is 3.65%, and average yield is 2.88%.

So it’s also hard to say that the statistics show that bidders were submitting low-ball bids this time around, because the numbers are very close to that of the previous auction.

In fact the average yield at 3.17% is higher than the previous auction.

Unfortunately, I don’t have any easy explanation why yields dropped further this time around, as the numbers don’t really show anything out of the ordinary.

I suppose you could argue that the 3 August auction date is a very good deal for CPF-OA buyers because it minimises lost CPF-OA interest.

But that’s quite a weak explanation at best in my view.

If anyone has any good theories, I would love to hear them.

That said, even T-Bills at 3.75% are still more attractive than Fixed Deposit which pays about 3.5%ish these days.

I applied but didn’t get any allotment of T-Bills

Full disclosure that I applied for the T-Bills this time around but didn’t get any allotment.

Frankly I was quite surprised at the result as I didn’t expect such a sharp drop in yields to continue, given global interest rate movements of late.

In any case, the next auction is just 2 weeks away on 17 August, so will try my luck again then.

How do you know if you have gotten 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 3.75%

65% allotment if you applied 3.75%

No allotment if you applied 3.76% and above.

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