BS25103S 6-Month T-Bill Yield Projection

This Opinion post first appeared in my blog here: https://pwlcm.wordpress.com/2025/02/11/bs25103s-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 ML25106T is 2.99%. I continue to consider the average yield premium of -0.22% and standard deviation of 0.08% in 2024. With that, the projected cut-off-yield for BS25103S would be:

Projected Cut-Off Yield = 2.99% – 0.22% = 2.77%
Projected Lower Yield = 2.77% – 0.08% = 2.69%
Projected Higher Yield = 2.77% + 0.08% = 2.85%

Polynomial Trendline Projection

Based on 3rd Order Polynomial Trendline Projection:

From the trendline projection chart, the projected yield is approximately at 3.10%. With standard deviation of T-bill cut-off yield at 0.32% as seen in the T-Bill Yield Premium Statistics table in 2024, the projected cut-off-yield for BS25102Z would be:

Projected Cut-Off Yield = 3.10%
Projected Lower Yield = 3.10% – 0.32% = 2.78%
Projected Higher Yield = 3.10% + 0.32% = 3.42%

Summary

Yield Premium Projection:
Projected Cut-Off Yield = 2.77%, ranging from 2.69% to 2.85%

Polynomial Trendline Projection:
Projected Cut-Off Yield = 3.10%, ranging from 2.78% to 3.42%

This round the MAS Bill cut-off yield suffered 9 basis points drop from the ML25104S issue, causing a similar 9 basis points drop in the Yield Premium projected yield. Its projected yield range overlapped with the lower half of that of the Polynomial Trendline Projection.

Considering the coming T-bill BS25103S with slight increasing supply at $7.3 billions, institution sentiment dropping another 9 basis points, and potentially renewed retail interest from last issue's positive surprise, I'm going to project the cut-off yield to be between the projected yield from the 2 methods, taking the midpoint at about 2.94%.