Analysis of 6-Month T-Bill BS22123S Auction Results

This Opinion post first appeared in my blog here: https://pwlcm.wordpress.com/2022/11/25/analysis-of-6-month-t-bill-bs22123s-auction-results/

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

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Yesterday (24 November 2022) was the auction day for the 6-month T-bill BS22123S issue. Similar to the previous BS22122Z issue, this time the release of the auction results was also delayed due to high volume of applications, but at least it was released earlier before 3:30pm, as the banks had probably gained experience from previous issue.

Auction Results

• Total Amount Allotted = S$4.8 billion
• Total Amount Applied = S$11.9 billion
• Total Non-Competitive Amount Allotted = S$1.9 billion
• % of Non-Competitive Amount Allotted = 77.78%
• Total Non-Competitive Amount Applied = 1.9 / 77.78% = S$2.4 billion
• Total Competitive Amount Applied = 11.9– 2.4 = S$9.5 billion
• Total Competitive Amount Allotted = 4.8 – 1.9 = S$2.9 billion
• Cut-off Yield = 3.9% p.a.
• Median Yield = 3.5% p.a.

• Average Yield = 3.26% p.a.

Compare BS22123S with BS22122Z

Let's compare the auction results of BS22123S with the previous T-bill (refer to "Analysis of 6-Month T-Bill BS22122Z Auction Results") as follows:

• Total amount allotted increased from S$4.5 billion to S$4.8 billion.
• Total amount applied dropped from S$14.2 billion to S$11.9 billion.
• Total non-competitive amount applied dropped from S$3.6 billion to S$2.4 billion.
• % of non-competitive amount allotted increased from 49.68% to 77.78%.
• Total competitive amount applied dropped from S$10.6 billion to S$9.5 billion.
• Cut-off yield dropped from 4% to 3.9%.
• Median yield stayed the same at 3.5%.
• Average yield increased from 2.87% to 3.26%.

Observations

• Overall supply increased while demand reduced.
• Those non-competitive applicants realized from the previous T-bill auction that they could get partial allotment, probably driving some of them to competitive bids this round.
• This resulted in lower over-subscription for non-competitive applications, hence they could get higher % allotment this time.
• Increase in average yield suggests that the competitive bidders might have realized the impact of too much lowballing would drag down the cut-off yield, and they are more rational in their bidding this round.
• Yet, the cut-off yield still suffered a slight drop of 0.1%.

MAS Bills to T-Bills Projection

I have updated the MAS Bills to T-Bills Projection table with the latest yields (refer to "Projection of T-Bills Cut-Off Yield"):

From the table, I noticed that the T-bill yield delta from MAS bill is -0.6%, the same as the previous T-bill yield delta. And it was negative since the 4th October BS22119T T-bill issue. Negative yield delta means yield curve inversion had occurred (i.e. shorter term 12-week MAS bills are having higher yields than the longer-term 6-month T-bills).

Linear Trendline Projection

I have also updated the Linear Trendline Projection chart with the latest yield (refer to "Projection of T-Bills Cut-Off Yield"):

The latest cut-off yield had dipped below the trendline. Chances are the yield would return to the trendline at approximately 4.35%.

Summary

• Over-subscription in non-competitive applications seems to be getting lower.
• More non-competitive applicants are moving to competitive bids.
• Competitive bidding is getting more rational, means potentially less lowballing in future bids.
• Some bidders are disappointed with the drop in cut-off yield causing them not getting any allotment.
• Some may give up on T-bills and instead intend to park their money with fixed deposits spotting comparable interest rates.