6-Month T-Bill Auction Trend – 2024 Q1 Update

This Opinion post first appeared in my blog here: https://pwlcm.wordpress.com/2024/03/31/6-month-t-bill-auction-trend-2024-q1-update/

Disclaimer: This post is just for educational sharing purposes. Please do your own due diligence on any products mentioned in this post.

The last 6-month T-bill (BS24106W) auction in the first quarter of 2024 has just ended on 27 March 2024. Let's update the auction trend I shared in the blog post 6-Month T-Bill Auction Trend in 2022 and 2023 with the latest quarter results.

6-Month T-Bill Yield

The cut-off yield had been hoovering between 3.5% to 4% since 2023. This quarter we are seeing average yield moving closer to median yield, suggesting that the retail investors are bidding more sensibly, meaning less low ballers. This is a healthy trend.

6-Month T-Bill Application & Allotment Amount

I have added the bid-to-cover ratio to the chart, basically indicating the level of oversubscription that reflects the market interest towards T-bills. While the competitive applications remained relatively stable at $4 billions, the non-competitive applications climbed from virtually zero to above $2 billions. That is because the rise of cut-off yield above 3% in 2022 had caught the attention of retail investors, especially those who found the yield attractive enough to invest their CPF OA money. The newbies would typically submit non-competitive applications because they didn't know how to set the competitive bid.

6-Month T-Bill vs 12-Week MAS Bill

The yield spread between T-bill and MAS bill seems to be narrowing in this quarter, again indicating the maturity of the retail investors.

T-Bill Yield Premium Statistics

The average T-bill yield premium over preceding MAS bill grew slightly wider in the first quarter than in 2023, so was the standard deviation.

Polynomial Trendline Projection

I have added this section to present a 3rd order polynomial trendline projection on the cut-off yield, first introduced in my blog post Projection of 6-Month T-Bills Cut-Off Yield in 2024. The projection results seemed to be quite promising for this quarter, but I'm not sure about the turn towards 5% at the end of the year. This doesn't quite gel with the CME FedWatch Tool projecting Fed fund rate easing happening in second half of the year.

I shall observe the effectiveness of this trendline projection in the second quarter, and revise the projection method if necessary.