T-Bills yields plunge to 3.85% – Demand went up a lot? Still a better buy than Fixed Deposits though (20 July 2023 Auction Results)



Auction results for the latest round of T-Bills are out!

And sadly, they are tracking the downtrend in US interest rates.

Cut-off yields close at 3.85% (as compared to 3.99% the previous round).

Look under the surface though, and you’ll find that the T-Bills application amounts jumped drastically.

So a meaningful part of this drop in yields can probably be attributed to higher demand from investors.


Auction: BS23114A 6-Month T-bill Auction Results – 3.85% Cut-off yield

Cut-off yield for the 20 July T-Bills auction below.

Yields have come down to 3.85%, vs 3.99% for the previous auction.

This is charted in graph form below.

Viewed this way, it looks like the previous 3.99% auction might be the exception rather than the norm.

Latest 3.85% cut-off yield is very much in line with the range since March 2023, if you exclude the 6 July auction.

Demand for T-Bills is up massively

Application amounts increased drastically to $12.2 billion (vs $10.3 billion the previous auction).

That’s an 18% increase in application amounts, which is notable.

Charted in graph form below.

Demand is up quite a bit.

This is back to the demand levels we saw in the first half of 2023.

What explains the drop in T-Bills yields?

This downtrend in T-Bills yields is in line with US interest rates, which have come down since the start of this month:

But you can see from the chart below that T-Bills demand did go up quite a bit, so you can’t chalk this purely up to market movement too.

And if you look at the underlying bid data, median yield and average yield are up from the past 2 auctions, so it’s not purely down to retail submitting low-ball competitive bids too.

It genuinely just looks like demand has gone up quite a bit, driving yields down.

How do you know if you have been allotted 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 3.85%

26% allotment if you applied 3.85%

No allotment if you applied 3.86% and above.

T-Bills still pay a higher yield than Fixed Deposit though

That said, the best fixed deposits are currently paying around 3.5-ish% yields.

So yields wise, T-Bills at 3.85% are still paying a higher yield than fixed deposit.


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