Is the 1-year T-bill better than the 6-month T-bill and fixed deposits?

What happened?

The yield on the 6-month T-bill has fallen over the past few months. 

The cut-off yield on the most recent 6-month T-bill (BS25107W) declined to 2.50% from 2.73% in the previous auction.

At the same time, fixed deposit rates in Singapore have declined in recent months too.

As such, I've seen fewer discussions in the Beansprout community about T-bills. 

With an upcoming 1-year Singapore T-bill auction (BY25101T) on 16 April 2025, I will be looking at some of the latest indicators to find out if it is worthwhile applying for the 1-year Singapore T-bill.

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What is the likely yield on the 1-year Singapore T-bill?

We’ve seen a divergence in Singapore government bond yields in recent weeks 

For example, the 10-year Singapore government bond yield initially fell to 2.45% in early April, but has since rebounded to 2.74%, tracking the recent surge in U.S. long-term yields.

The 1-year Singapore T-bill, however, has not followed the same upward momentum. The closing yield on the 1-year T-bill was 2.48% as of 10 April, based on MAS data.

This is well below the 2.95% cut-off yield seen in the January auction.

However, it is worth noting that the eventual cut-off yield in the auction may differ from the closing yield, as it will depend on the bids in the auction.

From the past few rounds of the 1-year T-bill auctions, we can see that demand for the T-bill has been fairly elevated. 

This has put pressure on the cut-off yield of the 1-year T-bill.

Buying Singapore 1-year T-bill – better than 6-month T-bill?

Rather than applying for the 1-year T-bill, one option to consider is to invest in two consecutive tranches of 6-month T-bills.

Specifically, we could invest in the upcoming 6-month T-bill auction on 24 April 2025, and reinvest the funds again when the T-bill matures in October.

If we apply for the next 6-month T-bill on 24 April, the maturity date would be on 28 October 2025. We could then choose to reinvest based on the prevailing interest rates at that time.

However, there’s a risk that yields may fall further in the second half of the year — especially if the U.S. Federal Reserve begins rate cuts. In this scenario, locking in the 1-year T-bill now could offer better overall returns with less reinvestment uncertainty.

While the current closing yield of 2.48% on the 1-year Singapore T-bill is close to the cut-off yield of 2.5% in the most recent 6-month T-bill auction, I will ask myself if I would want to lock in the rate now for 12 months, or take on reinvestment risk with the 6-month T-bill if yields drop significantly by October.

According to the latest US interest rate expectations of 10 April 2025, markets now expect a further U.S. rate cut to happen in June 2025. 

With potentially three rate from June to October 2025, this may mean that interest rates may be lower in the coming months.  

This means that we may get a potentially lower yield on the 6-month T-bill, when we are re-investing the proceeds from the first 6-month T-bill in October. 

However, with significant economic uncertainty with the tariffs announced, we will have to keep a close watch on interest rate trends.

For example, if the tariffs announced lead to a spike in inflation in the US, the Fed may have to raise interest rates rather than cut interest rates as expected currently. 

Buying Singapore 1-year T-bill using CPF – Is it worth it?

We shared earlier that due to the loss of CPF interest, it is generally more worthwhile to use your CPF funds to invest in the T-bill when the bond has a longer maturity.

For example, the breakeven cut-off yield for T-bill applications using CPF OA falls to about 2.7% for a 1-year T-bill from 2.9% for a 6-month T-bill, assuming the loss of one additional month of CPF interest.

However, with the closing yield on the 1-year T-bill now at 2.48%, it is below the breakeven yield for T-bill applications using CPF OA.

Buying 1-year T-bill using cash – better than fixed deposit?

Most Singapore banks have lowered their fixed deposit rates in January. Currently, the best 1-year fixed deposit rate we found is at 2.45% p.a. 

This would be much on par with the latest closing yield of 2.48% on the 1-year T-bill

Buying 1-year T-bill – better than Singapore Savings Bonds?

The current issuance of the Singapore Savings Bonds (SSB) offer a 1-year return of 2.49%.

This is close to the current closing yield on the 1-year Singapore T-bill.

Apart from offering a 1-year return of 2.49%, the latest SSB also allows us to lock-in a rate of 2.69% over 10 years, while having the flexibility to redeem prior to maturity. 

What would Beansprout do?

The current closing yield of the 1-year Singapore T-bill is 2.48%, which is close to the recent 6-month T-bill cut-off yield of 2.50%.

However, it might still be worthwhile considering the 1-year T-bill over the 6-month T-bill to avoid the uncertainty of reinvesting six months later, especially if significant rate cuts were to come through in the coming months. 

At the same time, the 1-year T-bill yield is also comparable to the best 1-year fixed deposit rate, which is currently at 2.45%

One of the ways to secure a potentially higher yield is to consider the Singapore Savings Bonds (SSB), which offers a 1-year return of 2.49% and average annual return of 2.69% over 10 years, while having the flexibility to redeem prior to maturity. 

The auction will be held on Wednesday 16 April 2025.

As cash applications for the T-bill close one business day before the auction date, we would need to put in our cash applications for the T-bill by 9pm on 15 April (Tuesday).

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Applications for the T-bill using CPF-OA will close 1-2 business days before the auction date, and the dates differ across the three local banks.

Applications for T-bills online using CPF OA via DBS close at 9pm on 15 Apr (Tue). Read our step-by-step guide to applying via DBS.

Application for T-bills online using CPF OA via OCBC close at 9pm on 15 Apr (Tue). Read our step-by-step guide to applying via OCBC

Applications for T-bills online using CPF OA via UOB close at 9pm on 14 Apr (Mon) Read our step-by-step guide to applying via UOB.

To learn more about T-bills and find out how to apply, check out our Comprehensive Guide to T-bills.

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