So I was actually quite keen to look at the results for this round of 6 month T-Bills.
Now that Fixed Deposit rates have been slashed across the board.
And it looks like we are approaching the later stages of this rate hike cycle.
I was quite curious to see whether T-Bills demand would go up strongly (sending yields down).
Or whether yields would remain high.
Well, the results are in – and they are interesting enough that I thought this was worth discussing.
6 month T-Bills issued at 3.78% yield – 11 May Auction Results
Here are the latest T-Bills auction results.
3.78% cut-off yield.
You can see the interest rate trend since August 2022 below.
Yes, yields have indeed come down from the December 2022 peaks.
But yields seem to have stabilised around the 3.7 – 3.8% range for the past few auctions.
Demand for T-Bills did not increase significantly
I was quite concerned that demand for T-Bills would rebound strongly because of two reasons.
First because the previous auction was exceptionally poor for CPF-OA buyers (would have lost an extra month of CPF-OA interest).
And secondly because bank fixed deposit rates have been slashed across the board, making it comparatively much more attractive to buy T-Bills instead.
As it turns out, this fear was pretty much unfounded.
Yes demand did go up – from $11.1 billion last auction, to $11.9 billion this auction.
But comparatively, that’s not that big an increase – only about a 7.2% increase.
And when you look at the application amounts over the past 10 months, you’ll find that T-Bills demand is actually still lower than where it was in November 2022 or even earlier this year.
Why is demand for T-Bills so tepid?
Why is this the case?
Where has all the demand for T-Bills gone?
I suppose you can argue that with such high yields, most investors have already parked their funds in either Fixed Deposits or T-Bills or Singapore Savings Bonds.
Not that many investors still have idle cash at the moment – to the extent where there’s not so much incremental demand for the new T-Bills.
That’s definitely possible, although if anyone has better theories I’m all ears.
T-Bills interest rates are better than Fixed Deposit interest rates
Not that I’m complaining.
I shared in the weekend article that the best 6 month Fixed Deposit I could find is 3.60% with Bank of China:
Which drops to 3.45% if you want to go with a local bank in UOB:
If T-Bills are closing at 3.78% yields, that’s very attractive and I will probably be parking my own funds there going forward.
Especially since everything can be done online, and I don’t need to go down to open a new fixed deposit account with Bank of China.
Love to hear what you guys think though.
At 3.78% – would you prefer T-Bills or Fixed Deposits going forward?
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