BS24117F 6-Month T-Bill Yield Projection

This Opinion post first appeared in my blog here: https://pwlcm.wordpress.com/2024/08/27/bs24117f-6-month-t-bill-yield-projection/

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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Yield Premium Projection

The updated 6-Month T-Bill vs 12-Week MAS Bill Yield chart and the T-Bill Yield Premium Statistics table are shown below:

The cut-off yield of ML24134T is 3.47%. Considering the average yield premium of -0.22% and standard deviation of 0.09% in 2024 so far, the projected cut-off-yield for BS24117F would be:

Projected Cut-Off Yield = 3.47% – 0.22% = 3.25%
Projected Lower Yield = 3.25% – 0.09% = 3.16%
Projected Higher Yield = 3.25% + 0.09% = 3.34%

Polynomial Trendline Projection

The updated Polynomial Trendline Projection chart is shown here:

From this trendline projection chart, the projected yield is approximately at 3.70%. With standard deviation of T-bill cut-off yield at 0.13% as seen in the T-Bill Yield Premium Statistics table in 2024, the projected cut-off-yield for BS24117F would be:

Projected Cut-Off Yield = 3.70%
Projected Lower Yield = 3.70% – 0.13% = 3.57%
Projected Higher Yield = 3.70% + 0.13% = 3.83%

Summary

Yield Premium Projection:
Projected Cut-Off Yield = 3.25%, ranging from 3.16% to 3.34%

Polynomial Trendline Projection:
Projected Cut-Off Yield = 3.70%, ranging from 3.57% to 3.83%

The projected yields from the 2 methods continued to widen further to 45 basis points. Will the cut-off yield be as low as 3.25%? Frankly I don't know, but I'm going to speculate that it remains within the upper half of the projected range for the Yield Premium Projection method, perhaps at about 3.30%.

This round the auction date and maturity date are 29 Aug 2024 and 4 Mar 2025 respectively, meaning it spans over 8 months and the breakeven yield for the CPF OA investors would be 3.34%. The demand from CPF OA investors would drop, either they skip this issue or bid at higher yield. In either case, it means potentially less low ballers and let the auction results stay at higher yield in the projected range.