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Investing in Singapore Treasury Bills (T-Bills) might sound reserved for experienced investors, but it’s one of the easiest and safest ways to grow your money.
In this post, you’ll learn:
- What T-Bills are and how they work
- Why they’re a safe investment option
- How to invest in them and check your auction results
If you’re looking for a secure place to park your cash, T-Bills might just be the perfect option for you.
Let’s dive in!
What are Singapore Treasury Bills (T-Bills)?
Singapore Treasury Bills (T-Bills) are short-term investments issued by the Singapore Government, designed to offer safe and reliable returns.
Unlike bonds, T-Bills don’t come with regular interest payments, also known as coupons.
Instead, they’re sold at a discount and redeemed at their full face value when they mature.
That difference between what you pay and what you get back is where your return comes from – simple, right?
Why invest in Singapore T-Bills?
Safety and security
Singapore T-Bills are one of the safest investments you can make.
Since they’re fully backed by the Singapore government, the risk of losing your capital is extremely low.
This makes them an ideal choice for conservative investors who want to prioritise the safety of their funds over taking big risks for higher returns.
Liquidity and flexibility
One of the standout features of T-Bills is their short-term nature.
With maturities of just 6 months or 1 year, you won’t have to tie up your money for too long.
This provides flexibility, as you can easily access your funds once the bills mature.
If you’ve got idle funds and want a secure, short-term option, T-Bills are an excellent choice.
And because they’re regularly auctioned, you can keep reinvesting when they mature or cash out, depending on your needs.
Competitive yields without a long-term commitment
Despite their safety, Singapore T-Bills offer competitive yields compared to other short-term savings options, such as fixed deposits.
The fact that they don’t require a long-term commitment is another plus, as you can earn reasonable returns without locking your money away for years.
T-Bills provide the perfect balance between security and returns if you’re looking for a short-term, low-risk way to grow your savings.
How do T-Bills work for investors?
T-Bills offer a straightforward and predictable way to earn a return on your investment.
They don’t pay regular interest like bonds do. Instead, when you invest in T-Bills, you buy them at a discount to their face value.
When they mature – either in 6 months or 1 year – you receive the full face value.
The return you earn is called the “yield,” it comes from the difference between the discounted price you paid and the amount you get back at maturity.
For example, if you bought a S$10,000 T-Bill for S$9,800, your earnings would be the S$200 difference once the T-Bill matures.
Why is the Singapore government offering T-Bills?
Raising funds for public spending
The primary reason the Singapore Government issues T-Bills is to raise funds for its spending needs.
By borrowing money from investors through T-Bills, the government can fund various public projects and services.
Since these are short-term loans, they’re an efficient way for the government to manage its finances without long-term debt commitments.
Maintaining liquidity and financial stability
T-Bills also play a crucial role in maintaining liquidity in the Singapore Government Securities (SGS) market.
They ensure that there are enough short-term instruments available for trading, which helps smooth out transactions and supports overall financial stability.
This liquidity is essential, as it keeps the market active and prevents any bottlenecks that could impact the flow of funds within Singapore’s financial system.
Establishing a government yield curve
T-Bills shape the government’s yield curve, which serves as a benchmark for pricing corporate debt.
This yield curve is critical in setting the tone for interest rates across various debt instruments in the country.
By offering T-Bills, the Singapore government creates a foundation for how other entities, such as corporations, price their debt securities.
Supporting the secondary market and risk management
T-Bills also support a vibrant secondary market, where they can be traded after the initial auction.
This secondary market aids in cash transactions and derivatives trading, providing financial institutions with the tools for effective risk management.
As a result, T-Bills not only benefit the government but also play an integral role in helping banks and financial institutions manage their risks efficiently.
Direct investment for investors
Lastly, Singapore T-Bills offer individual and institutional investors a simple, direct way to invest in government-backed securities.
T-Bills provide investors a low-risk, reliable option that combines safety with competitive yields.
The ease of access and short-term nature of T-Bills make them a popular choice among those looking to invest in secure government instruments.
How are T-Bills issued?
T-Bills are issued through a public auction, where investors bid to secure them.
Think of it like trying to snag a limited-edition collectable – the more competitive your bid, the better your chances.
There are 2 main types of bids: non-competitive and competitive, each suited to different investors.
Non-competitive bid
If you’re new to T-Bills or prefer a more straightforward approach, the non-competitive bid is perfect.
With this option, you don’t need to worry about specifying a yield.
You decide how much you want to invest, and the government ensures you’ll get T-Bills at the auction’s cut-off yield.
The great thing is that up to 40% of the total T-Bill issuance is prioritised for non-competitive bidders, which means you’re more likely to secure your desired investment.
However, if demand exceeds supply, your allocation will be reduced pro-rata, meaning you might not get the requested amount.
Competitive bid
For more experienced investors or institutions seeking a specific yield, the competitive bid is the way to go.
Here, you specify not only the amount you want to invest but also the minimum yield you’re willing to accept.
After considering non-competitive bids, T-Bills are allocated to competitive bidders from the lowest to highest yields.
While aiming for a lower yield increases your chances of winning the auction, there’s no guarantee you’ll receive the full amount you bid for.
If demand is high, only part of your bid might be accepted.
Who can invest in T-Bills?
T-Bills are open to investors of any nationality or residence, allowing Singaporeans, permanent residents, and foreigners to participate.
Individuals at least 18 years old and not undischarged bankrupt can participate in T-Bill auctions, making it a suitable option even for young adults starting their investment journey.
Institutions, such as banks and companies, are also eligible, making T-Bills a popular, secure short-term investment choice across different investor types.
How do I apply for T-Bills?
1. Set up an account with a participating bank
To apply for Singapore T-Bills, you’ll need an account with one of the 3 local banks: DBS/POSB, UOB, or OCBC.
These banks facilitate the T-Bill application process, whether you’re applying through cash, CPF, or SRS.
If you don’t already have an account with one of these banks, you must open one before proceeding.
2. Open a Central Depository (CDP) account
You’ll also need an individual Central Depository (CDP) account to hold your T-Bills.
The CDP account acts as a safekeeping place for your investments.
Make sure you’ve activated Direct Crediting Services (DCS) so any interest or principal repayments are credited directly to your bank account once your T-Bills mature.
3. Decide on your funding source
You can purchase T-Bills using one of 3 funding options: cash, CPF savings, or your SRS account.
- Cash: If you’re funding your T-Bill purchase with cash, ensure you have sufficient funds in your bank account to cover the investment. This option gives you flexibility and easy access to liquidity once the T-Bills mature.
- CPF: You can also use your CPF Ordinary Account (OA) savings to buy T-Bills via the CPF Investment Scheme (CPFIS). This is a popular option for CPF members looking to diversify their investments while still maintaining the safety of government-backed securities.
- SRS: Another option is to use your Supplementary Retirement Scheme (SRS) funds. If you have an SRS account, you can use these savings to invest in T-Bills, giving you an additional tax-efficient way to grow your retirement fund.
Once you’ve made these decisions, you can apply through your bank’s Internet banking portal, specifying whether you’re placing a competitive or non-competitive bid.
How do I check my auction results?
Central Depository (CDP) notification
If you’ve successfully secured T-Bills, you’ll receive a notification directly from the Central Depository (CDP).
This is typically sent to your email or mobile number linked to your CDP account.
It will confirm the T-Bills allocated to you and the final yield.
Internet banking
You can also check the results via your bank’s internet banking platform.
Log in to your DBS/POSB, UOB, or OCBC account and navigate to the “Singapore Government Securities” section.
Here, you’ll find details about your T-Bill bid and whether it was successful, including the amount allocated and at what yield.
Monetary Authority of Singapore (MAS) website
For general information about the auction’s results, including the cut-off yield and allotment amounts, you can visit the Monetary Authority of Singapore (MAS) website.
MAS regularly publishes the results of each auction, which can give you an idea of how the bids performed, even before checking your allocation.
What happens when T-Bills are oversubscribed?
Priority for non-competitive bids
Non-competitive bids, typically made by individual investors, are given priority for up to 40% of the total issuance.
This ensures that smaller investors still have a chance to receive their desired amount of T-Bills.
However, if demand in the non-competitive category exceeds this limit, the allocation is pro-rata.
This means you may only receive part of the amount you applied for based on the overall demand.
Competitive bids are allocated by yield
After non-competitive bids are fulfilled, the remaining T-Bills are allocated to competitive bidders, starting from the lowest yield upwards.
If you placed a competitive bid at a lower yield, you’re more likely to receive T-Bills.
However, due to the high demand, even competitive bidders may only receive a partial allocation or, in some cases, none if their bid was at a higher yield.
Pro-rata allocation
In competitive and non-competitive bids, if the T-Bills are oversubscribed, the excess demand is managed through a pro-rata allocation.
This means each investor will receive a portion of the T-Bills, proportional to the amount they bid for but possibly less than the full amount they initially requested.
Oversubscription is common when T-Bills offer attractive yields compared to other savings options, so it’s something to be aware of when placing bids.
Can I redeem my T-Bills early?
No, you cannot directly redeem your Singapore T-Bills before they mature.
However, if you need to access your funds early, you can sell them on the secondary market.
Once you’ve bought T-Bills, they can be sold on the secondary market, where investors trade government securities before maturity.
Banks or financial institutions often facilitate these trades, and the process is relatively straightforward if you decide to sell your T-Bills before they mature.
Here are a few things to consider when selling your T-Bills early:
- Price fluctuations: The price you sell your T-Bills for will depend on current market conditions. If interest rates have dropped since you bought them, you may be able to sell your T-Bills for more than you paid, making a profit. However, if interest rates have risen, you may have to sell at a loss.
- Liquidity: While there is a market for T-Bills, it’s not as liquid as stocks, meaning it could take some time to find a buyer, depending on the demand.
- Transaction costs: When selling your T-Bills through a bank or broker, remember that fees may be involved. It’s important to check with your financial institution for any associated costs before you make the sale.
Who are Singapore T-Bills for?
Conservative investors
If you prioritise the safety of your capital and prefer low-risk investments, T-Bills are an excellent option.
Backed by the Singapore government, they offer security with almost zero risk of default, making them ideal for those who want to preserve their wealth while earning a modest return.
Short-term investors
For those who don’t want to lock their money away for too long, T-Bills are perfect.
With maturities of just 6 months or 1 year, they allow you to keep your investments liquid while earning a predictable return.
Investors seeking alternatives to fixed deposits
T-Bills are often compared to fixed deposits, as they offer similar safety but sometimes better returns.
If you’re looking for a low-risk alternative to a fixed deposit, especially when T-Bill yields are higher, they provide a secure and flexible option without needing long-term tie-ins.
Frequently Asked Questions
What is the current T-Bill interest rate?
The current T-Bill interest rate, or yield, varies with each auction. It depends on factors such as market demand and overall economic conditions.
You can check the latest rates on this website or through your bank’s updates after each auction.
Can I submit multiple bids at the T-Bills auction?
Yes, you can submit multiple bids at the T-Bills auction.
However, each bid must be treated as a separate application, and it’s important to note that bids placed through different banks or channels are handled independently.
Conclusion
To sum it up, Singapore T-Bills are a great option if you’re looking for a safe, short-term investment backed by the government.
They offer solid returns through a simple process – you buy them at a discount and get the full value when they mature.
Whether you are a beginner or an experienced investor, T-Bills provide a flexible way to grow your money without locking it away for years.
We’ve covered how T-Bills work, their benefits, and who can invest in them.
If you’re still unsure about how to get started or whether T-Bills are the right fit for your investment goals, don’t worry!
Our financial advisor partners are here to help. Feel free to chat with them for free, and they’ll guide you through the process, answering any questions you might have.
Investing doesn’t have to be complicated, and with the right advice, you’ll be making smarter financial decisions in no time!
