It’s been quite a while since my last T-Bills article.
During which time, T-Bills yields have plunged to 2.20%, when it was close to 3.0% just a few months back.
So I figured it was well overdue for an article discussing T-Bills and this sharp drop in yields.
3 questions I wanted to discuss:
- Will T-Bills yields keep dropping or go back up to 3.0%? Why have T-Bills yields plunged?
- 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? (5 June 2025 Auction)
The next 6-month T-Bills auction is on 5 June 2025 (Thurs).
This means that the deadline to apply is:
- 9pm on 4 June (Wed) for cash applications (and CPF-OA applications via DBS or OCBC internet banking)
- 9pm on 3 June (Tues) for UOB CPF-OA applications
6-month T-Bills yields dropped to 2.20% at the most recent auction
In the most recent 6-month T-Bills auction, cut-off yields fell to 2.20%.
You can see how yields were close to 3.0% just a few months, so this has been a very sharp drop.
And a sharp decline for 4 consecutive options.
Most definitely not a good sign for investors looking for yield.
But… the market is not really pricing in a lot of rate cuts?
A lot of you have asked whether the Feds will cut interest rates rapidly going forward.
But if you really think about it, the impact of the tariffs is potentially quite inflationary for the US, given a minimum of 10% baseline tariffs on all US imports, and higher for certain countries (like China) or strategic sectors.
With those kind of inflationary pressures on the horizon, Jerome Powell has said a few times (and I think he’s absolutely right) that the Feds will watch the data closely before deciding whether to cut.
And if the economy holds up and inflation stays elevated, they may not be so eager to cut rates.
That said – the market continues to price in 4 rate cuts priced in over the next 12 months.
Frankly if you ask me this is quite aggressive pricing by the market, because like I said you really have no clue what is the true impact of these tariffs.
Demand for T-Bills remains very high at $18.1 billion
Whatever the case.
Demand for T-Bills continues to be very high despite the drop in yields (although this is chicken and egg because you could argue the drop in yields comes because demand remains high).
We see $18.1 billion in demand for T-Bills, despite the drop in interest rates.
Yes this has come down since the peak a couple of auctions back – but objectively speaking it remains very high.
Will demand for T-Bills stay high, or will it drop?
A big wildcard is where demand will come in at the next T-Bills auction.
With the sharp drop in interest rates to 2.20% – will we still see strong demand, or will we see investors start to shift cash elsewhere?
Note that at 2.20% it no longer makes sense to park CPF-OA in T-Bills, as after accounting for lost interest you’ll lose money buying T-Bills with CPF-OA.
2.20% is also not that competitive compared to fixed deposits or money market funds, so it is possible that we may see demand for T-Bills drop going forward.
6-month T-Bills yields stable on the open market – trading at 2.20%
On the open market – 6-month T-Bills trade at 2.20%, exactly in line with 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.
T-Bills Supply is up slightly to $7.6 billion
T-Bills supply is exactly flat at $7.6 billion – up slightly from the past few auctions.
Not a good sign – we would want to see much higher auction amounts if we want to see higher yields.
Estimated yield of 2.15% – 2.30% on the 6-month T-Bills auction?
Putting everything together.
High demand for T-Bills, coupled by the market pricing in 4 rate cuts over the next 12 months – that’s not a good combination for interest rates.
The big wildcard is whether demand for T-Bills will drop – given the sharp drop in yields.
Will investors decide to go with alternative options instead, and will we see demand drop?
No easy answers here.
All things considered – I think T-Bills yields probably stabilise around the previous auction price, and market price.
I’m probably going with an estimated yield of 2.15% – 2.30% for the next 6-month T-Bills auction.
However, I do not deny that there is significant volatility in markets right now that could easily spill over into interest rates, so I do not have a high degree of confidence in this forecast.
What are the alternatives to T-Bills in this market? Fixed Deposit, Money Market Funds, Bonds?
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Comparing interest rates for T-Bills vs Fixed Deposits vs Syfe Cash+ Guaranteed across all tenures (Mar 2025)
I’ve compared the latest T-Bills auction yields against other options in the market today.
You can actually see how the yield for the 6 months tenure seems to have settled at around the 2.2 – 2.3% levels.
Viewed in this light, T-Bills, Fixed Deposit, Syfe Cash+ and Money Market Funds look fairly equal to each other – nothing much to choose between them (although you could argue fixed deposit is the winner here).
| 3 months | 6 months | 12 months | Risk Free | |
| T-Bills yields | NA | 2.20% | 2.08% | Yes |
| Fixed Deposit (direct to bank) | 2.28% | 2.35% | 2.45% | Yes (if below $100,000 SDIC limit) |
| Syfe Cash+ Guaranteed (Institutional Fixed Deposit Rates) | 2.30% | 2.20% | 2.05% | No |
| Money Market Funds | ~2.8% | No | ||
In fact viewed this way the 2.45% offered by DBS Bank for a 12 months fixed deposit looks like an outlier and pretty much a no brainer.
The only downside is that the maximum you can put in is $19,999:
Where would I put my cash today?
With the recent drop in yields – the 6-month T-Bills are no longer that attractive in my view.
So let’s explore some alternatives below.
UOB One, DBS Multiplier, OCBC 360 (High Yield Savings Account)
With the recent fall in yields, High Yield Saving Accounts have not been spared.
UOB One used to pay a 4.0% blended yield on $150,000, that is fully liquid and can be withdrawn any time.
However, this has now been slashed to 3.3% on $150,000, with no change to the conditions.
That said 3.3% is still higher than T-Bills at 2.20%, so I will probably still continue to park cash here for now.
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 2.5% 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.
Singapore Savings Bonds are an acceptable alternative too
Interest rates on the latest Singapore Savings Bonds below (already window to apply has closed – but you can wait for next month’s).
You’re looking at 2.20% for the first 3 years, stepping up to 2.56% over 10 years.
I don’t think this is amazing, but you can see that it’s still comparable to the other fixed deposit style options above.
PIMCO GIS Income Fund via Maribank
For more duration, you can consider buying a bond fund.
One example is the PIMCO GIS Income Fund, that you can access via Maribank.
It’s known as Mari Invest Income, and is by invitation only for now.
I wrote a detailed review so do check it out if you are keen.
Bottom line is that these bond funds are quite a complex instrument, and not for everyone.
Because if interest rates go up, you can suffer mark to market capital losses.
And there is no way to hold to maturity as the bond fund will automatically reinvest proceeds.
So effectively there is some timing element involved here, in that you want to buy the fund when yields are high, and sell when yields are low, and if you do it the other way around you could see mark to market capital losses.
Best used only if you have a mid to longer term investment horizon.
Will I start buying T-Bills again? Where to park cash for the highest yield today?
With the recent drop in T-Bills yields.
I don’t think T-Bills are that attractive any more to be honest.
I’ll probably skip T-Bills and park my short term cash in money market funds for now.
But that’s just how I see it, and I would love to hear what you think.
Estimated yield on the next 6-month T-Bills auction? (5 June 2025 Auction)
The next 6-month T-Bills auction is on 5 June 2025 (Thurs).
This means that the deadline to apply is:
- 9pm on 4 June (Wed) for cash applications (and CPF-OA applications via DBS or OCBC internet banking)
- 9pm on 3 June (Tues) for UOB CPF-OA applications
This post is written on 30 May 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.