6-month T-Bills yields jump to 3.80% – Demand for T-Bills drop quite a bit (29 Feb 2024 Auction Results)

T-Bills yields have been on a roller-coaster ride recently.

From as high as 4.07% in September 2023.

T-Bills yields then dropped as low as 3.54% in early Feb.

Since then – T-Bills yields have been marching up.

From 3.66% the previous auction, up to 3.80% this auction.

What’s driving the rise in T-Bills yields?

6-month T-Bills yields jump to 3.80% (29 Feb 2024 Auction Results)

I’ve extracted the cut-off yield for the latest T-Bills auction below.

This round of 6-month T-Bills are issued at 3.80% yield (a fairly big jump from 3.66% the previous auction).

I’ve charted this in graph form below.

T-Bills yields are well off the Feb lows, and comfortably back into the 2023 range.

Demand for T-Bills drops to $12.4 billion (from $13.5 billion the last auction)

Demand for T-Bills drops to $12.4 billion.

This is down 10.1% from the previous auction ($13.5 billion), and quite a significant drop.

Charted below, you can see how T-Bills demand is coming well off the 2024 highs.

Why exactly is T-Bills demand down so sharply might be the better question though.

Unfortunately I don’t have any easy answers for this – and welcome any theories.

Note that the auction amount of $6.4 billion this auction is actually down from the $6.6 billion the previous auction.

So the fact that the cut-off yields went up quite a bit despite the low auction amount is notable.

This suggests that had auction amount been maintained, we would have seen an even larger jump in T-Bills yields.

More lowballers? Spread between median and average yield

The spread between the median and average yield tells you how many “low-baller” bids there were.

To illustrate what this is:

Imagine you have 100 bids.

The median yield, is if you arrange all the bids from small to high, and take the yield of the 50^th bid.

While average yield, is adding up the yields of all 100 bids and dividing by 100.

So average yields are skewed by lowball bids, while median yields are not.

To put it simply – the bigger the spread between the median yield and average yield, the more “low-ballers”.

Spreads actually went up the most recent auction.

Suggesting that the rise in yields is despite the fact that investors are submitting lowball bids.

What drove the rise in T-Bills yields?

Interestingly if you look at the market yields on 12-week MAS bills – you’ll find that they are flat and have not moved materially.

Yields on US 6 month T-Bills have also been flat the past few weeks.

While T-Bills auction amount actually went down, and spread data indicates no material change in bidding style.

So it would appear that the move in T-Bills yields is largely due to reduced investor demand – the 10.1% drop in demand for T-Bills.

But why exactly investor demand went down though – I don’t have any easy answers, and would love to hear what you think.

How do you know if you have been allotted T-Bills?

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 3.80%

9% allotment (approximately) if you applied 3.80%

No allotment if you applied 3.81% and above.

If you forgot what you bid, 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).

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