BS24119S 6-Month T-Bill Yield Projection

This Opinion post first appeared in my blog here: https://pwlcm.wordpress.com/2024/09/24/bs24119s-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 ML24138V is 3.17%. Considering the average yield premium of -0.23% and standard deviation of 0.09% in 2024 so far, the projected cut-off-yield for BS24119S would be:

Projected Cut-Off Yield = 3.17% – 0.23% = 2.94% Projected Lower Yield = 2.94% – 0.09% = 2.85% Projected Higher Yield = 2.94% + 0.09% = 3.03%

Polynomial Trendline Projection

In the previous blog post BS24118Z 6-Month T-Bill Yield Projection, I showed the FedWatch Tool on 9 September 2024 was showing 71% probability of 25 basis point drop in Fed Fund Rate. How the scale had tilted in favour of 50 basis point drop one week later on 16 September 2024:

And the Fed did announce a 50 basis point rate cut in their 18 September meeting. Considering fed fund rate is projected to ease till mid 2025, I would still continue with 2nd Order Polynomial Trendline Projection:

From the trendline projection chart, the projected yield is approximately at 2.81%. With standard deviation of T-bill cut-off yield at 0.22% as seen in the T-Bill Yield Premium Statistics table in 2024, the projected cut-off-yield for BS24119S would be:

Projected Cut-Off Yield = 2.81% Projected Lower Yield = 2.81% – 0.22% = 2.59% Projected Higher Yield = 2.81% + 0.22% = 3.03%

Summary

Yield Premium Projection: Projected Cut-Off Yield = 2.94%, ranging from 2.85% to 3.03%

Polynomial Trendline Projection: Projected Cut-Off Yield = 2.81%, ranging from 2.59% to 3.03%

Again I'm going to follow more towards the Yield Premium Projection method, projecting the auction results to be around 2.94%.