Adulting and investing go hand in hand and most investments require a long-term horizon. Enter treasure bills (T-bills), which are short-term Singapore Government Securities (SGS) issued at a discount to their face value.
If you haven’t heard, T-bills have been very well-received lately. In fact, The Business Times revealed that the latest 10 November 2022 auction saw individual investors making over 92,000 bids – some for more than S$1 million.
Not quite sure what T-bills are? We’ve got you covered. Read on to find out everything you need to know.
What are T-bills?
T-bills are fully backed by the Government of Singapore. They are also known as zero coupon bonds as no coupons will be issued. Instead, T-bills are issued at a discount to the face value that pay a fixed rate of interest. Upon maturity of the bond, investors will receive the full face value.
Why should I invest in T-bills?
If you are looking for a short-term investment, T-bills could be an option for you. The Government issues 6-month and 1-year T-bills, with 6-month T-bills being the most common choice.
For instance, if you were to purchase a 6-month T-bill worth S$20,000 with a yield of 4% per annum, you would only have to pay S$19,600 upfront. When your T-bills mature after 6 months, you will receive the full sum of S$20,000, and earn S$400 from this investment.
Furthermore, T-bills are risk-free, with an “AAA” credit rating which reduces investing risks to the bare minimum.
Read more: Investment Portfolio Basics: What is it, and How to Build One?
Who can buy T-bills?
T-bills can be purchased by individuals who are at least 18 years of age, including non-residents. These individuals must not be bankrupt.
The minimum investment for T-bills is S$1,000, and the maximum is 15 percent of the issuance size – which applies for both competitive and non-competitive applications by individual investors. On non-competitive bids, there is a cap of S$1 million.
How can I buy T-bills?
T-bills can be invested through cash, Central Provident Fund ordinary account (OA) and special account (SA) savings, or supplementary retirement scheme (SRS) funds. Depending on the type of your application, this is how you can apply:
| Type of Application | Requirement | How to Apply | How to Check Results |
| Cash | ● A bank account with local banks including OCBC, UOB, and DBS/POSB ● A Central Depository (CDP) account linked to your local bank account you intend to invest with | OCBC, UOB, and DBS/POSB ATMs and internet banking portal | Check your CDP statement |
| CPFIS-OA | A CPF investment Account with one of the three CPFIS agent banks including OCBC, UOB, and DBS/POSB | Submit an in-person application at one of your CPFIS-OA agent banks. Application is limited to your CPFIS-OA agent bank to facilitate the settlement process of T-bills purchased under CPFIS-OA. | Check the CPFIS statement sent by your agent bank (OCBC, UOB, or DBS/POSB) |
| CPFIS-SA | There is no need to start a CPF Investment Account if you intend to invest CPFIS-SA funds | Submit an in-person application at any branch of the CPFIS bond dealers (OCBC, UOB, or DBS/POSB) | Check your CPF statement |
| SRS | SRS account with one of the SRS operators including OCBC, UOB, and DBS/POSB | Your SRS Operator’s (OCBC, UOB, or DBS/POSB) internet banking portal | Check statements from your SRS Operator (OCBC, UOB, or DBS/POSB) |
For scheduled auctions, you can check the issuance calendar.
What are the disadvantages of investing in T-bills?
There are caveats to investing in T-bills.
For one thing, the interest rates are only revealed after the announcement of the auction results. Since T-bills are auctioned, the actual interest rates will be determined by the yields.
Additionally, you are not able to redeem T-bills before its maturity. However, you can sell your T-bill on the secondary market at either OCBC, UOB, or DBS/POSB. Before maturity, the price of your T-bill may rise or fall. Furthermore, the trading volume for T-bills is low, which renders your T-bill investment illiquid. Therefore, make sure you have enough liquidity before you decide to invest in T-bills.
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What are the alternatives when interest rates go down?
Of course, as with every investment, the interest rates are likely to fluctuate. In fact, the cut-off yield on the 24 November auction dipped to 3.9 percent, from the 4 percent in its 10 November auction. This is because the 24 November auction was 2.5 times subscribed for its S$4.8 billion allotment, the highest year-to-date for this tenor’s T-bills.
Fret not though – as we always advocate at Planner Bee, the key to investment is to diversify your portfolio.
Other than investing in T-bills, you can also consider investing in the Singapore Savings Bonds (SSB), which is also issued by the Singapore Government. Unlike T-bills, SSB has a 10-year maturity term, but you can withdraw or redeem your savings bond at any time without penalties, offering you financial liquidity.
Alternatively, you can also invest your CPF savings after setting aside S$20,000 in your OA and S$40,000 in your SA. You can invest up to 35% of your investable OA savings in funds and stocks, and up to 10% in gold and gold-related products. There is no cap on how much of your investable SA savings you can invest, but you have to maintain a minimum balance of S$40,000.
Assess whether CPFIS is suitable for you by taking the quiz here.
Read more: Creating Your Investment Strategy: Short-term or Long Run?
Investing is a lifelong journey
Investing is a lifelong financial strategy, since your financial needs will evolve over time. Before you make any investment decisions, always consider whether you have enough liquidity. Investing in T-bills alone will not make you rich overnight, but it is a safe and short-term option for you to park your excess funds.
Lastly, we can’t emphasise enough on the importance of having a diversified portfolio. Diversifying your portfolio lowers the risk of losing all your investments at one go, and it ensures a more stable rate of return.
If you prefer robo advisors, you can check out our recommendations for the best short-term and long-term robo advisors.
As always, don’t hesitate to reach out to us at ask@plannerbee.co if you have burning questions about investments!
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