It’s been quite a while since my last T-Bills article.
During which time, T-Bills yields have plunged to 2.38%, when it was close to 3.0% just a few months back.
Because of that, 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? (7 May 2025 Auction)
The next 6-month T-Bills auction is on 7 May 2025 (Thurs).
This means that the deadline to apply is:
- 9pm on 6 May (Wed) for cash applications (and CPF-OA applications via DBS or OCBC internet banking)
- 9pm on 5 May (Tues) for UOB CPF-OA applications
6-month T-Bills yields dropped to 2.38% at the most recent auction
In the most recent 6-month T-Bills auction, cut-off yields fell to 2.38%.
You can see how yields were close to 3.0% just 4 auctions ago, so this has been a very sharp drop.
And a sharp decline for 3 consecutive options.
Most definitely not a good sign for investors looking for yield.
Big change in rate cut expectations for 2025 – 4 rate cuts priced in
A big reason behind the drop in interest rates – is due to the market pricing in more interest rate cuts going forward.
Because of growth fears arising from Trump tariffs and DOGE cuts, and recent data pointing towards a slowdown in the US economy.
The market is now pricing in 3 interest rate cuts in 2025.
In my view this (and the flight to safety) is one of the biggest reasons driving the sharp drop in T-Bills yields.
Demand for T-Bills remains very high at $16.6 billion
Speaking of flight to safety.
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 $16.6 billion in demand.
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 2.38% – will we still see strong demand, or will we see investors start to shift cash elsewhere?
Note that at 2.38% 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.
That said, you will have noticed that banks have been slashing interest rates across the board as well of late, so comparatively speaking the 2.38% on T-Bills may not be too bad for investors looking to park cash (more on this below).
6-month T-Bills yields stable on the open market – trading at 2.36%
On the open market – 6-month T-Bills trade at 2.36%, 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.
T-Bills Supply is exactly flat at $7.4 billion
T-Bills supply is exactly flat at $7.4 billion – unchanged from the past few auctions.
Not a good sign – we would want to see higher auction amounts if we want to see higher yields.
Estimated yield of 2.30% – 2.40% on the 6-month T-Bills auction?
Putting everything together.
High demand for T-Bills, coupled by weak US data and tariffs leading to the market pricing in more rate cuts – 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 2.30% – 2.40% 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?
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 2.4%ish 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.
| 3 months | 6 months | 12 months | Risk Free | |
| T-Bills yields | NA | 2.36% | 2.22% | Yes |
| Fixed Deposit (direct to bank) | 2.40% | 2.40% | 2.60% | Yes (if below $100,000 SDIC limit) |
| Syfe Cash+ Guaranteed (Institutional Fixed Deposit Rates) | 2.50% | 2.40% | 2.45% | No |
| Money Market Funds | ~2.5% | No | ||
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.
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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 2.36%, 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.
Alternatively GXS is paying 2.38% for 3 months, but like I said this is pretty much in line with the fixed deposits 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? (7 May 2025 Auction)
The next 6-month T-Bills auction is on 7 May 2025 (Thurs).
This means that the deadline to apply is:
- 9pm on 6 May (Wed) for cash applications (and CPF-OA applications via DBS or OCBC internet banking)
- 9pm on 5 May (Tues) for UOB CPF-OA applications
This post is written on 2 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.