A Complete Guide to Treasury Bills (T-Bills) in Singapore

Yen Joon

Yen Joon

Last updated 21 December, 2022

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

The Singapore Treasury Bill or T-bill has seen a resurgence in popularity of late, with application rates hitting record levels.

For example, the 6-month yield for T-bill in December 2022 (BS22124H) hit 4.4% p.a., making it the second-highest yield in its history. The total application was also S$9.3 billion, two times more than the S$4.6 billion amount allocated. 

With interest yields for T-bills going up, you may be considering whether you should invest in them, considering that they offer a shorter tenure of 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?

 


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What are T-bills and how do they work?

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 as a lender is relatively low (note: it’s not risk-free).

T-bills are deemed as short-term bonds as the tenor is either six months or a year, and are issued every fortnightly or quarterly. 

The minimum investment is S$1,000, and you can invest in subsequent multiples of S$1,000, such as S$2,000, S$5,000, and so on. Besides cash, you can also invest with your Supplementary Retirement Scheme (SRS) funds or your CPF funds. 

Like SGS bonds, there’s also no limit to how much you can hold, but you’re allowed to bid up to a maximum of S$1M in each auction.

However, unlike the SSB and SGS bonds, T-bills don’t pay out interest. Instead, you buy T-bills at a discount to the face (par) value and receive the par value when the bond matures. 

For example, if you were to pay S$1,000 to buy a 1-year T-bill bond with a yield of 3% p.a., you would only need to pay S$970 upfront. When the bond matures, you’ll receive the full S$1,000 in return, therefore earning you S$30. 

Another thing to note is that the interest yield for T-bills is only revealed when the auction results are announced. This contrasts with the SSB and SGS bonds, where the interest rates will be announced prior to the issuance. 

Also, like SGS bonds, there’s no early redemption for T-bills; if you want to redeem your T-bills before the maturity period, you’ll need to sell them in the secondary market through the main branches of DBS, OCBC, or UOB

Bank

Contact

Branch address

DBS

1800-111 1111

12 Marina Boulevard Level 3

UOB

1800-222 2121

80 Raffles Place

OCBC

1800-363 3333 

65 Chulia Street

However, it’s also worth noting that bond prices are hugely influenced by price swings in the market. So depending on the market condition, it's possible that you might sell at a loss.

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

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

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

Bond type

SSB

SGS bonds

T-bills

Tenor

10 years

2, 5, 10, 15, 20, 30, or 50 years

Six months or a year

Minimum investment

S$500 (and in subsequent multiples of S$500)

S$1,000 (and in subsequent multiples of S$1,000)

S$1,000 (and in subsequent multiples of S$1,000)

Maximum investment 

S$200,000 overall

Auction: up to the allotment limit for auction


Syndication: none

No limit, but up to the allotment limit for auctions

Investment funds

Cash and SRS

Cash, SRS, CPF (auction), cash (syndication) 

Cash, SRS, CPF

How often is interest paid

Every six months, starting from the month of issue

Every six months, starting from the month of issue

At maturity

Can redeem before maturity?

Yes

No early redemption. Investors can receive the face (par) value at maturity

No early redemption. Investors can receive the face (par) value at maturity

Type of interest payment

Fixed coupon with a ‘step up’ interest

Fixed coupon

No coupon; issued and traded at a discount to the face (par) value 

Secondary market trading

No

At DBS, OCBC or UOB main branches; on SGX through brokers

At DBS, OCBC or UOB main branches 

Tax exempted?

Yes 

Yes 

Yes

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What is the current T-bill interest rate?

As mentioned, the interest rate for T-bills is determined at the auction. But you can estimate the interest rate based on the current yield, which is affected by demand and supply. 

The previous issuance (BS23100Z) had a cut-off yield of 4.2% p.a.

Here are the details of the latest T-bill(s):

Issue code

BS23101S

Tenor

6 months

Cut-off yield

4%

Total amount offered

S$5 billion

Announcement date

11 January 2023

Auction date

18 January 2023

Issue date

25 January 2023

Maturity date

25 July 2023

Here are the details of the upcoming 1-year T-bill:

Issue code

BY23100X

Tenor

1 year

Cut-off yield

TBA

Total amount offered

S$3.6 billion

Announcement date

11 January 2023

Auction date

18 January 2023

Issue date

25 January 2023

Maturity date

25 July 2023

The previous 6-month T-bill (BS23101S) has a cut-off yield of 4%, a slight drop from the previous T-bill of 4.2%. 

Meanwhile, the upcoming T-bill will be a 1-year T-bill (BY23100X) which will be available for auction on 26 January.

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

How to buy T-bills in Singapore?

To buy T-bills in Singapore, 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 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, you’ll need to submit your applications at any branch of your CPFIS bond dealers (DBS/POSB, OCBC, or UOB). 

What are competitive and non-competitive bids?

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

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. 

Note that you will only get the full amount if your bid is lower than the cut-off yield. If your bid is equal to the cut-off yield, then your return might be lower.

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 bid, instead of the yield. Go for this if you want to invest in the bond regardless of the return or if you’re unsure of what yield to bid. This is what most would go for. 

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

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

How to check on the 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. 

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

With the latest interest yields of T-bills surpassing not only the CPF OA's basic 2.5% interest rate per year, but also both the CPF SA 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 be also 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 make a withdrawal this month.

As CPF explains it:

using cpf to invest t bills

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 the previous 6-month T-bill (BS22122Z), which spans a total of seven months (from Nov 2022 to May 2023) and has 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.

However, remember that there are fees involved when buying T-bills.

When investing with your CPF, you'll incur a one-time transaction fee of S$2.50 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 up to debate 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.

cpf interest ratesSource

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 extra bonus 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’re looking to invest in the short term and want to park your money in a safe place. You’ll also be guaranteed a fixed-interest payment when the bond matures. Furthermore, the interest that you earn is higher than what you would get from a bank savings account.

What’s more, the US Fed is likely to increase interest rates further, which means that interest rates for T-bills will also go up. 

That said, while the yield for T-bills is at a record high, it's still not sufficient to beat inflation. And, as mentioned, the interest rate for T-bills isn’t certain. 

Also, T-bills 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 don’t mind investing for a longer period of time, you might want to consider investing in the SSB or SGS bonds instead.

Read these next:
The SSB vs CPF: Which One Has Better Returns?
The Best Places To Store Your Emergency Fund
What Are SINGA Bonds (SGS Bonds) And Should You Invest In Them?
The Complete Guide To Singapore Savings Bond (SSB) — Return Rates And How It Works
13 Best Fixed Deposit From Top Banks In Singapore To Lock In Your Savings

In my past life, I was always broke because of a lack of financial literacy. Now, I publish a few posts every week* on personal finance to help you manage your money better. *I mean, I’ll try