6-month T-Bills yields rise to 3.80% – Demand for T-Bills jump to record high (27 March 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 started to stabilise around the 3.80% range.

From 3.78% the previous auction, up to 3.80% this auction.

However – demand for T-Bills has risen to record highs for all of 2023/2024, so the fact that T-Bills yields did not drop materially is interesting.

So I wanted to take a look at the numbers, to understand what’s driving the move in T-Bills yields?

6-month T-Bills yields jump to 3.80% (27 March 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 small increase from 3.78% the previous auction).

This is in line with the 3.80% yield from 2 auctions ago.

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 jumps to $15.6 billion (from $14.4 billion the last auction)

This stabilisation in T-Bills yields comes despite a massive increase in application amount.

At $15.6 billion in demand for T-Bills, this is an 8.3% increase from the previous auction.

Charted below, you can see how T-Bills demand is at record highs – higher than all of the demand we saw in 2023 / 2024.

However non-competitive applications only see 94% allotment (96% the previous auction).

This suggests that part of the rise in T-Bills demand came from the non-competitive applications segment, which does not affect cut-off yields.

Note that the auction amount of $6.1 billion this auction is actually down from the $6.3 billion the previous auction.

So the fact that the cut-off yields stabilised at current levels despite the lower auction amount is notable.

This suggests that had auction amounts gone up, we would actually have seen an even bigger increase in T-Bills yields.

Less lowballers, more rational bidding for T-Bills?

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 continued going down the most recent auction.

This suggests that while demand for T-Bills went up a lot, investors are pretty rational with their bidding, and not submitting lowball bids just to get an allotment.

What drove the stabilisation in T-Bills yields?

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

No notable news came out from the Feds last week as well, basically confirming the 3 interest rate cuts priced into the market.

So it appears that interest rates have generally stabilised around current levels for now, which has allowed investors to submit more accurate / rational bids.

At least until interest rate cuts take place in the second half of 2024.

I redeemed Singapore Savings Bonds to apply for T-Bills

Personally I applied for a decent amount of T-Bills this auction.

With the change in the inflation and interest rate outlook, I decided to redeem some of my Singapore Savings Bonds and rotate into T-Bills for the higher short term yields.

I submitted competitive bids, and saw 100% allotment.

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

If you applied Non-Competitive Bid, you will get 94% allotment of whatever you applied for.

Ie. If you applied $100,000, you get $94,000 worth of T-Bills allotted.

If you applied Competitive Bid, then:

Full allotment if you applied below 3.80%

30% 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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