The next 6-month T-Bills auction is on 29 August 2024 (Thursday).
As most of you would know, T-Bills yields have dropped sharply of late.
From 3.64% just 2 auctions ago, to as low as 3.34% in the most recent auction.
So I wanted to look at the 29 August T-Bills auction and discuss 3 questions:
- What is the expected yield on the next 6-month T-Bills Auction?
- What are the alternatives to buying T-Bills today (for cash / CPF-OA?
- Will I still buy the 6-month T-Bills despite falling interest rates?
What is the expected yield on the 29 August 6-month T-Bills Auction? – BS24117F 6-Month T-bill
6-month T-Bills yields continue their drop to 3.34% at the most recent auction
In the most recent T-Bills auction, cut-off yields continued their drop to 3.34%.
Charted below, this is the lowest yields we’ve seen over the past 18 months.
6-month T-Bills yields stabilise on the open market – trading at 3.34%
The good news though, is that 6-month T-Bills yields look to have stabilised on the open market at 3.34%.
This suggests T-Bills may stabilised around the 3.34% level… for now at least.
But… T-Bill trading liquidity is very small (and therefore market yields are not that useful)
That being said – trading liquidity on the T-Bills is so thin that actually the market pricing is not that useful.
You’ll find that the market pricing actually takes its cue from the latest T-Bills auction, instead of the other way around.
So I would caution against placing too much reliance on market pricing on T-Bills.
12-week MAS Bills generally flat at 3.61%
The 12-week MAS Bills back up this trend thought – generally flat at 3.61% (was 3.63% at the last auction).
MAS Bills are an institutional only product – and therefore a good indicator of the trend for T-Bills.
This backs up the suggestion that T-Bills yields may stabilise at current levels.
Market is pricing in 4 interest rate cuts in 2024
With inflation coming down, and the US labour market weakening.
The market is pricing in a lot of rate cuts going forward – up to 4 cuts in 2024.
Again, the good new though, is that this was already “priced-in” at the previous auction.
There hasn’t been a big increase in rate hike expectations the past few weeks, so by that logic you would not expect a sharp drop in the 6-month T-Bills yields.
T-Bills Supply is down slightly to at $6.8 billion (vs $6.9 billion at previous auction)
Unfortunately T-Bills supply is going down slightly in this auction.
We’re looking at $6.8 billion in T-Bills, down slightly from the $6.9 billion at the previous auction.
In past auctions, auction amount has been a key driver of T-Bills yields, so this is not a good sign.
T-Bills Application Amount (Demand) come down to $16.0 billion (vs $18.0 billion the last auction)
The good news though.
Is that because of the drop in T-Bills yields.
Demand for T-Bills has started to come down.
Application amount for T-Bills in the most recent auction fell to $16.0 billion (vs $18.0 billion in the previous auction).
That said even after the decline, demand remains very much higher than levels we saw in 2023.
Estimated yield of 3.30% – 3.40% on the 6-month T-Bills auction? BS24117F 6-Month T-bill
Generally speaking the data seems to suggest that yields will stabilise around current levels (3.34%).
Barring any big surprise from Jackson Hole, market is not pricing in any big changes around rate cut expectations.
Demand for T-Bills has definitely come down, but as supply is coming down slightly as well, it’s hard to see that having a major impact on yields.
I would probably go with an estimated yield of 3.30% – 3.40% on the next T-Bills auction.
Of course, this is just an estimate, and actual yields can vary – especially if demand moves materially, or bidding is unusual.
Given the volatility, I suggest that investors submit a competitive bid to protect against a sharp drop in yields.
And place your bid as close to the auction date as possible, just in case something funky happens in markets.
What are the alternatives to 6-month T-Bills? With CPF-OA?
If you’re using CPF-OA, OCBC actually offers 3.10% for 6 months for a CPF Fixed Deposit.
At 3.1% it’s still lower than where T-Bills are likely to come in, so you’re probably still better off with T-Bills.
What are the alternatives to 6-month T-Bills to park cash?
If you’re investing with cash, these are the alternatives:
| Instrument | Approximate Yield | Maximum | Risk Free? |
| UOB One (or other high yield savings account) | 4.00% | $150,000 | SDIC insured up to $100,000 |
| 6-month T-Bills | 3.34% | No maximum | Yes |
| Money market fund like Mari Invest or Fullerton SGD Cash Fund | 3.5% – 3.6% | No maximum | No |
| Fixed Deposits | 3.25% | No Maximum | SDIC insured up to $100,000 |
| Singapore Savings Bonds | 3.06% (first year) | $200,000 per person | Yes |
| MariBank Account | 2.70% | $100,000 | SDIC insured up to $100,000 |
Let’s talk though them quickly.
Follow Financial Horse to avoid missing any post!
I also send out a newsletter at 10am every Sunday – rounding up the posts from Financial Horse for the week. Sign up below!
Best 6 month fixed deposit yield is 3.25% with RHB Bank
Fixed deposit rates have come down across the board.
Best fixed deposit today is 3.25% with RHB Bank.
Syfe Cash+ Guaranteed pays 3.30% yield for 6 months tenure
You can also consider Syfe Cash+ Guaranteed (who then deposits the cash into an institutional fixed deposit deposit).
This allows you access to institutional fixed deposit rates – 3.30% for 6 months.
Do note that Syfe Cash+ Guaranteed is NOT SDIC insured though.
Money Market Funds pay about 3.5% – 3.6% yields – but are likely to fall with rate cuts
The benefit with Money Market Funds like Mari Invest or Fullerton SGD Cash Fund is that you can get the money back any time with T+1 liquidity.
The yields are actually higher than T-Bills – Mari Invest is paying about 3.57% over the past 30 days for me.
The problem is that because money market funds typically invest in instruments with 4 – 12 week duration.
Once the Fed cuts happen, it is likely their yields will start to drop.
Whereas because the T-Bills are a 6-month instrument, in a way the T-Bills have “priced-in” the rate cuts while money market funds have not.
Singapore Savings Bonds are a pretty decent alternative to T-Bills
As shared in last week’s article – Singapore Savings Bonds are worth looking at too.
You’re getting a first year yield of 3.06%, that is locked in for the first 7 years.
That steps up to 3.10% over 10 years.
Risk free, and can be redeemed any time, and can also be held for 10 years.
With the latest 6-month T-Bill yielding only 3.34%, that’s just a 0.3% lower in yield, for all the benefits above.
And if last month’s Singapore Savings Bonds are any indication, it looks like allocation limits might be very high.
Next month’s SSBs are likely to have much lower yields, so if you want some don’t miss this chance.
Will I still buy 6-month T-Bills with lower interest rates?
Some readers have commented that with declining interest rates, it’s better to buy REITs or stocks instead.
Just to be clear, the purpose of this article isn’t to discuss that.
I myself am buying REITs / stocks, and you can see what I am buying on FH Premium.
The purpose of this article is mainly to discuss where I am parking my cash that is not invested in the markets.
In the past the big chunk of them was in T-Bills, but with the sharp drop in yields it has definitely opened up alternatives.
For the recent maturing T-Bills, I have generally parked them in MariInvest (Money Market Funds), with a smaller amount parked in Chocolate Finance / Bond Funds.
With stabilising yields, I’ll probably submit a competitive bid for the 29 Aug T-Bills auction, while also buying some Singapore Savings Bonds to hedge against further drops in interest rates.
But that’s just me – would love to hear what you are doing!
Deadline to apply for the T-Bills auction on 29 August (Thurs) – BS24117F 6-Month T-bill
Next 6 months T-Bills auction is on 29 August (Thurs).
Deadline to apply is therefore:
- 9pm on 28 Aug (Wed) for cash applications (and CPF-OA applications via DBS or OCBC internet banking)
- 9pm on 27 Aug (Tues) for UOB CPF-OA applications
This post is written on 23 Aug 2024 and will not be updated going forwards. My latest views on markets, my Stock watchlist and full Personal Portfolio, are shared on FH Premium.
Follow Financial Horse to avoid missing any post!
I also send out a newsletter at 10am every Sunday – rounding up the posts from Financial Horse for the week. Sign up below!
For this BS24117F 6-Month T-bill, applicants using cpf oa funds would lose 2 months of cpf interest, hopefully, there would be less demand & more rational bidding this round, meaning higher yields?
It is possible. But in previous cycles where this happened, we didn’t really see a material drop in demand though. But let’s see.