A Complete Guide To Treasury Bills (T-Bills) In Singapore

T-bills are short-term government bonds that allow you to park your money safely. But are they good investments?

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The Singapore Treasury Bill, or T-bill, is one of the most popular fixed-income financial instruments around.

Backed by the Singapore government, T-bills are practically risk-free and offer stable returns. They also have a short maturity period of either six months or a year. 

But just what are T-bills? And how do they differ from other Singapore Government bonds like the Singapore Savings Bond (SSB) and the Singapore Government Securities (SGS) bond? More importantly, are T-bills good investments?

What is the current T-bill interest rate?

The interest rate for T-bills is determined at the auction. Here are the details of the latest T-bill:

The cut-off yield of the latest 6-month T-bill (BS24114V) has fallen to 3.64% p.a. from the previous 6-month T-bill's (BS24113N) 3.70% p.a. yield.  

However, demand for the latest T-bill tranche was marginally higher, with S$15.7 billion in applications for the S$6.8 billion on offer, with a bid-to-ratio of 2.3.

In comparison, the previous 6-month T-bill S$15.6 billion in applications for the S$6.5 billion on offer, with a bid-to-ratio of 2.4.

The latest T-bill also saw approximately 83% of non-competitive applications allocated, amounting to S$2.7 billion, while about 82% of competitive applications at the cut-off yield were allocated.

The next 1-year T-bill is now open for applications. Below are the details: 

(Note that the application period typically opens a week before the auction date and closes 1 to 2 business days before the auction, but you can check with your bank on the exact closing date)

There will also be an upcoming 6-month T-bill on 25 July.

You can view the 2024 auctions and issuance calendar on MAS’ website here.

T-bills Singapore: what are T-bills?

T-bills are government bonds that are backed by the Singapore government, which holds a ‘AAA’ credit rating from credit rating agencies (the highest rating possible). In other words, this means that the risk of losing your money is relatively low (note: it’s not risk-free).

T-bills are deemed short-term bonds with a short maturity period of either six months or a year. They're also issued every fortnightly or quarterly and are sold in denominations of S$1,000. 

SSB Vs SGS bonds Vs T-bills: What's the difference?

Here’s an overview comparison between the SSB, SGS bonds, and T-bills:

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How do I buy T-bills in Singapore?

You can invest in T-bills with cash, funds from your Supplementary Retirement Scheme (SRS) funds, or your CPF savings. 

Like SGS bonds, there’s no limit to how many T-bills you can hold, but you can bid up to a maximum of S$1M in each auction.

To buy T-bills, you’ll need the following:

• A bank account with DBS/POSB, OCBC, or UOB
• A Central Depository (CDP) account linked to the bank account that you intend to invest with
• For CPFIS applications: a CPFIS account with DBS/POSB, OCBC, or UOB
• For SRS applications: an SRS account 

If you’re investing with cash, you can apply through DBS, OCBC, or UOB ATMs or internet banking (under invest>Singapore Government Securities).

For SRS applications, you can apply through the internet banking portal of your SRS operator (DBS, OCBC, or UOB).

Finally, for CPFIS applications, CPF members can apply online through DBS i-banking portal or POSB digibank online (under invest>Singapore Government Securities). Note there will be a S$2.50 fee (excluding GST) if you use your CPF OA funds. 

OCBC and UOB members can also apply online under the CPFIS via their respective services. For UOB, go to investment

Or, you can do it the old-fashioned way by submitting your applications at any branch of your CPFIS bond dealers (DBS/POSB, OCBC, or UOB). 

Do T-bills pay out interest?

Unlike the SSB and SGS bonds, T-bills don’t pay out interest. Instead, you buy T-bills at a discount to the par (face) value and receive the par value when the bond matures. In other words, the upfront discount is essentially the profit you earn and you'll receive your full principal amount when the T-bill matures.   

For example, if you were to pay S$5,000 to buy a 6-month T-bill bond with a yield of 3% p.a., you would only need to pay S$4,925 upfront. When the bond matures, you’ll receive the full S$5,000 in return, thus earning you S$75.
 

T-bills interest yields

Another thing to note is the actual interest yield for T-bills is only revealed when the auction results are announced. So unlike the SSB and SGS bonds, where you'll know the exact interest rates you'll be getting before buying, T-bills are auctioned first before the yields are determined. 

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Can I redeem my T-bills early? 

One caveat of T-bills is you can't redeem your T-bills before they mature. That said, you can sell them to other buyers in the secondary market through the main branches of DBS, OCBC, or UOB. 

The drawback of selling in the secondary market is that price swings influence bond prices in the market. In other words, the price that you sell your T-bills might be lower than what you had paid.

Aside from market conditions, another downside to selling your T-bills is a lack of interested buyers. Hence, it’s generally advisable to hold your T-bills until maturity.

T-bills Singapore: what are competitive and non-competitive bids?

Like SGS bonds, T-bills are issued via auctions in competitive and non-competitive bids. 

A competitive bid is where you buy T-bills at your desired yield based on the price you're willing to pay. Every competitive bid exercise asks you to state the lowest yield you're willing to accept. The lower the yield, the more competitive it is.

Opt for a competitive bid if you want your funds to be invested only if the cut-off yield is above your specified yield, up to 2 decimal places. A competitive bid is usually for savvy investors. 

Note that you will only get the full amount if your bid is lower than the cut-off yield. If your bid equals the cut-off yield, your return might be lower as the allocation is pro-rated.

That said, you're allowed to submit multiple competitive bids, so one strategy is to submit several bids with different amounts to ensure that some of your bids are allocated. 

On the other hand, a non-competitive bid is where you specify the amount you want to buy and are willing to accept the discount rate at the auction. This is the best option for most retail investors. 

If you want to invest in the bond regardless of the return or are unsure of what yield to bid, go for a non-competitive bid. This method also guarantees you receive the full amount of the T-bill when it matures. 

Remember that non-competitive bids will be allocated first, up to 40% of the total issuance amount. However, if non-competitive bids exceed 40%, the bond will be allocated pro-rated. The remaining amount will be given to competitive bids from the lowest to highest yields.

The maximum allotment for non-competitive bids is S$1 million per T-bills auction, which means you can't apply for more than S$1 million in an auction. For instance, if you apply for S$500,000 on the first day and S$600,000 on the second day, you would need to reduce the amount to S$500,000 to apply again. 

You may refer to the auction days based on the MAS’ auctions and issuance calendar. 

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T-bills Singapore: how to check T-bills auction results?

You’ll be issued T-bills three business days after the results are revealed. 

If you applied with cash, you can check your CDP statement.

If you applied with your SRS funds, you can check the statements from your SRS operator (DBS/POSB, OCBC, and UOB).

If you applied with your CPFIS-OA, you can check your CPFIS statement from your agent bank (DBS/POSB, OCBC, and UOB).

For CPFIS-SA, you can check your CPF statement. 

T-bills maturity: where will the funds be credited?

When your T-bills mature, the proceeds will be credited to your Direct Crediting Service (DCS) bank account. This may not be the same bank account that you used to apply for the T-bill, but you can check your CDP account to see which bank account is registered as your DCS account. 

If you applied with your CPF money, the funds will be credited to your CPFIA or CPF-SA. 

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Should you invest in T-bills using your CPF savings?

With the latest interest yields of T-bills surpassing the CPF OA's basic 2.5% interest rate per year and around the CPF SA's and RA's 4% interest rate, you may be wondering whether it's a good idea to use your CPF monies to invest in T-bills.

Before deciding to invest with your CPF savings, here are some factors to consider beforehand:

Liquidity

If you foresee yourself using your CPF monies in the near future — be it for buying a  property or if you need to withdraw your CPF RA savings (if you’re 55 and above) — within the next six to 12 months, then it’s better to leave your savings in your CPF account than to invest it.

Remember that you can't redeem your T-bills before maturity and would need to sell them in the secondary market if you want to redeem them before maturity.   

However, as mentioned, bond prices fluctuate based on the interest rate environment and market conditions, so you might not be able to get back your principal amount.

Additionally, there must also be an interested buyer who's willing to match your price. As such, consider your time horizon before investing in T-bills.  

Opportunity cost and fees

When using your CPF monies to invest in T-bills, there are also opportunity costs to consider, particularly the risk of losing out on the CPF interest. 

If you didn't already know, CPF interest is computed monthly and compounded annually based on the lowest balance of that month.

For example, CPF contributions received this month will only start earning interest next month. You also won't earn any interest from this month onwards if you withdraw this month.

As CPF explains it:

In other words, this means that you won't earn interest in the months that you use your CPF-OA funds to apply for T-bills until the month after you receive the money back from T-bills into your account. 

For example, say that you invested S$10,000 of your CPF OA savings in a 6-month T-bill with a cut-off yield of 4%.

The amount of interest you'll be forgoing in your CPF OA for seven months is: S$10,000*2.5%/12*7 = S$145.80

On the other hand, the yield that you'll receive from the T-bill is S$10,000*4% = S$200.

While the investment returns you get from T-bills are slightly higher, remember that you will be charged a fee for purchasing T-bills, so you need to factor that in too.

When investing with your CPF, you'll incur a one-time transaction fee of S$2.50 + GST and a quarterly charge of S$2 per issue. Hence, investing in a 6-month T-bill will incur a total fee of S$6.50. 

So, if you include the fees, the net yield you'll receive is S$200 - S$6.50 = S$193.50. 

Therefore, the excess interest earned from T-bills is S$193.50 - S$145.80 = S$47.70. 

While money is money, it's debatable whether gaining S$47.70 is worth using your CPF savings for.

Don't forget that you must apply in person at a bank if you invest via CPFIS. Therefore, you'll also need to spend time queuing up, visiting the bank, finding a parking spot, etc.  

Losing out on additional interest from CPF

Remember that the government will pay you a bonus interest of 1-2% based on your CPF savings and age.

Source

Those below 55 years old can earn an additional 1% p.a. on the first S$60,000 of their combined CPF balances (capped at S$20,000 of CPF OA). This means that you can earn up to 3.5% p.a. on your CPF OA savings and up to 5% p.a. on your CPF SA and MediSave. 

Meanwhile, those 55 years old and above can earn an additional 2% on the first S$30,000 of their combined balances. Again, this is capped at S$20,000 for CPF OA. You'll also earn an extra 1% on the next S$30,000, meaning that you can earn up to 6% p.a. on your CPF retirement funds. 

As such, the additional interest given by CPF is still quite attractive, so before using your CPF-OA funds to invest, consider your risk appetite and time horizon. 

Are T-bills good investments?

T-bills can be good investments if you want to invest in the short term and park your money in a safe place as their backed by the Singapore government. You’ll also be guaranteed a fixed interest payment when the bond matures and you can start investing with a small capital of S$1,000. Furthermore, there's also no capital gains tax.

That said, while the yield for T-bills is attractive, it's only slightly above the core inflation rate in Singapore, which is currently 5% as of October 2023. T-bills also offer around the same interest rates as fixed deposits and savings accounts, though it's not near their maximum rates.  

Another drawback of T-bills is that they aren’t as liquid as the SSB, as you’ll need to sell your bonds in the secondary market if you want to redeem them early. This could also result in losses as bond prices fluctuate according to market conditions.

If you're willing to lock up your money in something for longer, consider investing in the SSB or SGS bonds. But, if you want a short-term investment that offers competitive returns, T-bills might just be the right investment for you. 

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