BS25104H 6-Month T-Bill Yield Projection

This Opinion post first appeared in my blog here: https://pwlcm.wordpress.com/2025/02/25/bs25104h-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 ML25108W is 2.85%. 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 BS25104H would be:

Projected Cut-Off Yield = 2.85% – 0.22% = 2.63%

Projected Lower Yield = 2.63% – 0.08% = 2.55%

Projected Higher Yield = 2.63% + 0.08% = 2.71%

Polynomial Trendline Projection

Based on 3rd Order Polynomial Trendline Projection:

From the trendline projection chart, the projected yield is approximately at 3.07%. 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 BS25104H would be:

Projected Cut-Off Yield = 3.07%

Projected Lower Yield = 3.07% – 0.32% = 2.75%

Projected Higher Yield = 3.07% + 0.32% = 3.39%

Summary

Yield Premium Projection:

Projected Cut-Off Yield = 2.63%, ranging from 2.55% to 2.71%

Polynomial Trendline Projection:

Projected Cut-Off Yield = 3.07%, ranging from 2.75% to 3.39%

This round the projected yield from the Yield Premium method and Polynomial Trendline method suffered a drop of 14 and 3 basis points respectively.

Considering the supply of the coming T-bill BS25104H has increased to $7.5 billions, and institution sentiment dropping 14 basis points, I'm going to project that the cut-off yield will drop further to about 2.80%.