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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