In my most recent analysis on T-Bills, I looked at how the best 6 month Fixed Deposit rates yielded only 2.75% (Bank of China).
And yet T-Bills were yielding 3.04%.
This made T-Bills pretty much a no brainer.
Well, if I can figure this out, it seems that pretty much everyone figured it out too.
Because demand for T-Bills soared 52% to $23.3 billion (vs $15.3 billion the previous auction).
And T-Bills yields dropped all the way back down to 2.90%
Which leads to the question – what’s going to happen at the next auction.
Will we see demand drop back down, and T-Bills yields go back up?
3 questions I wanted to discuss:
- Estimated yield on the next 6-month T-Bills auction?
- What are the alternatives to T-Bills in this market? Fixed Deposit, Money Market Funds, Bonds?
- Will I buy more T-Bills today? Where to park cash for the highest yield today?
Estimated yield on the next 6-month T-Bills auction? (27 Feb 2025 Auction)
The next 6-month T-Bills auction is on 27 Feb (Thurs).
This means that the deadline to apply is:
- 9pm on 26 Feb (Wed) for cash applications (and CPF-OA applications via DBS or OCBC internet banking)
- 9pm on 25 Feb (Tues) for UOB CPF-OA applications
6-month T-Bills yields dropped to 2.90% at the most recent auction (vs 3.04% at the previous auction)
In the most recent 6-month T-Bills auction, cut-off yields fell to 2.90% (was 3.04% the previous auction).
You can see from the chart below how this is the lowest yields in the past 24 months:
Demand for T-Bills soared to $23.3 billion (vs $15.3 billion the previous auction)
The reason why – because demand for T-Bills absolutely soared.
The chart below shows how mind blowing the increase in demand was.
From $15.3 billion to $23.3 billion – that’s a massive 52% increase in application amount.
It’s no wonder that T-Bills yields fell so sharply!
6-month T-Bills yields stable on the open market – trading at 2.91%
On the open market – 6-month T-Bills trade at 2.91%, which is actually very close to the latest T-Bills auction yield.
That being said – trading liquidity on the T-Bills is so thin that actually the market pricing is not that useful.
So I would caution against placing too much reliance on market pricing on T-Bills.
No big change in rate cut expectations for 2025
On interest rate cuts – no big change in market pricing of late.
Market is still pricing in 2 rate cuts in 2025.
So I would not expect any big change in T-Bills yields arising from this.
T-Bills Supply is up at $7.5 billion ($7.3 billion at the previous auction)
The good news is that T-Bills supply is going up to $7.5 billion.
This is the highest T-Bills auction amount since 2023, which is good news for investors (if you want higher yields).
Will demand go up or down in the next auction?
The million dollar question of course.
Is whether demand will stay at ridiculously high levels?
Or whether it will come back down due to lower yields.
And frankly, your guess is as good as mine here.
My gut feel is that demand will come down, but I don’t know if it will come back down to levels seen in the previous auction.
If so many people have spare cash to deploy, good chance some of it rolls over to the next auction.
But frankly, this is just an educated guess, and this is the biggest wildcard in my view.
Estimated yield of 2.85% – 3.00% on the 6-month T-Bills auction?
Putting everything together.
I think T-Bills yields probably however around the market price of 2.91%.
I’m probably going with an estimated yield of 2.85% – 3.00% for the next 6-month T-Bills auction.
The reason for the bigger range this time around is because of the big uncertainty over demand.
If demand stays very high, that will place downward pressure on yields.
If demand falls sharply, we could see a meaningful rebound in yields.
So let’s see.
What are the alternatives to T-Bills in this market? Fixed Deposit, Money Market Funds, Bonds?
Comparing interest rates for T-Bills vs Fixed Deposits vs Syfe Cash+ Guaranteed across all tenures (Feb 2025)
I’ve compared the latest T-Bills auction yields against other options in the market today.
You can see how, despite the drop in yields – the 6-month T-Bills are actually still decently attractive today.
Risk free, and higher than many of the competing options.
So it does raise the question of whether demand will continue to remain elevated.
| 3 months | 6 months | 12 months | Risk Free | |
| T-Bills yields | NA | 2.90% | 2.91% | Yes |
| Fixed Deposit (direct to bank) | 2.90% | 2.75% | 2.60% | Yes (if below $100,000 SDIC limit) |
| Syfe Cash+ Guaranteed (Institutional Fixed Deposit Rates) | 2.85% | 2.75% | 2.35% | No |
| Money Market Funds | ~3.1% | No | ||
Where would I put my cash today?
Even after the drop in yields – T-Bills still remain pretty attractive as you can see from the table above.
T-Bills are completely risk free as well (backed by the Singapore government), the only issue is that the liquidity is tied up as you cannot get the cash back before maturity.
So if you asked me, that’s probably where I would be parking my spare cash for now, barring any further drop in yields.
However you can’t put all your cash in T-Bills as you do still need some liquidity.
In which case you can check out some of the options below:
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UOB One, DBS Multiplier, OCBC 360
This one is self-explanatory, so I won’t dwell on it.
A high yield savings account like UOB One pays 4.0% blended yield on $150,000, that is fully liquid and can be withdrawn any time.
If it works for you, high yield savings accounts like these are probably the best option.
If they don’t work (whether you can’t meet the requirements or don’t have enough spare cash), then just use the other options on this list.
Money market fund instruments (like MariInvest) or fintech plays (like Chocolate Finance/GXS/FD) on the short end
Alternatively there is MariInvest which is a money market fund that pays about 3.1% over the past 30 days for me.
It’s definitely come down because of the rate cuts, but for something that is pretty low risk and with good liquidity (first $10,000 can be withdrawn instantly, rest is T+1 liquidity), it’s a decent option in my view.
Alternatively, there’s stuff like Chocolate Finance that even after the drop in rates, will pay about 3.3% on the first $20,000 (fully liquid, but note not SDIC insured).
While GXS is paying 2.98% for 3 months:
There is some investor discretion required here as unlike T-Bills, not all the instruments above (eg. Chocolate Finance / money market funds) are risk free.
But generally speaking I think all of the above are decent enough alternatives to T-Bills and Fixed Deposits.
Singapore Savings Bonds
Alternatively there are the latest Singapore Savings Bonds which yield 2.76% for the first year.
Frankly this is not too bad and competitive with the latest 6 or 12 month Fixed Deposit rates.
So this is another option too, as they can be withdrawn any time (get your money back at the start of the next month).
For more duration – Bond Funds
For more duration, you can consider buying a bond fund.
But bond funds are quite a complex instrument, and not for everyone.
Because if interest rates go up, you can suffer capital losses.
And there is no way to hold to maturity as the bond fund will automatically reinvest proceeds, so the timing at which you sell matters too.
I wrote quite a few articles on this in the past, and do check them out for more information (see here or here).
Will I start buying T-Bills again? Where to park cash for the highest yield today?
Will the recent pickup in T-Bills yields.
And assuming T-Bills yields stay above 3.0%.
I think T-Bills are pretty much a no brainer vs fixed deposit.
The drawback is (and always has been) that you cannot get liquidity back on short notice.
Which is why you cannot park all of your cash in T-Bills, and you need to have some funds in other instruments like UOB One, Singapore Savings Bonds, and so on.
Personally with all the volatility in markets I’ve been adding to my risk exposure with the cash from my maturing T-Bills (see what I am buying on FH Premium).
So I may not apply T-Bills at this point in time, as I do want the liquidity.
Whatever spare cash, I’ll probably just park in a money market fund like MariInvest for the time being.
But that said – if I had cash I don’t mind locking up for 6 months, I think T-Bills are probably the best option I would consider at this point.
Deadline to apply for the T-Bills auction on 27 Feb (Thurs)
The next 6-month T-Bills auction is on 27 Feb (Thurs).
This means that the deadline to apply is:
- 9pm on 26 Feb (Wed) for cash applications (and CPF-OA applications via DBS or OCBC internet banking)
- 9pm on 25 Feb (Tues) for UOB CPF-OA applications
This post is written on 21 Feb 2025 and will not be updated going forward. My latest views on markets, my Stock watchlist and full Personal Portfolio, are shared on FH Premium.