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 (BS25101F) declined to 2.99% from 3.05% in the previous auction.

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

This led some investors in the Beansprout community to ask if it might then be more worthwhile applying for the upcoming 1-year T-bill.

There will be an upcoming 1-year Singapore T-bill auction (BY25100H) on 23 January 2025. 

In this post, 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.

Stay updated on the T-bill

Sign up to receive a free email reminder when the next Singapore T-bill auction is open.

Subscription preferences

• Reminder for Tbill

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

We have seen an increase in Singapore government bonds since the start of 2025 in January.

For example, the 10-year Singapore government bond has increased from 2.86% at the end of December to 2.98%.

The yield on the 1-year Singapore T-bill has also been rising over the past few months.

The closing yield on the 1-year Singapore T-bill was at 2.80% on 16 January, based on daily market prices published by the MAS. 

This is higher than the cut-off yield of 2.71% in the previous auction in October 2024.

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 apply for the 1-year T-bill, one option to consider is to invest in two separate tranches of 6-month T-bill.

Specifically, we can invest in the upcoming 6-month T-bill auction, and re-invest the funds when the T-bill matures in six months’ time. 

If we apply for the next 6-month T-bill on 28 January, the maturity of the T-bill will be on 05 August 2025.

We can then apply for the next 6-month T-bill auction upon maturity of the T-bill. 

While the closing yield of 2.8% on the 1-year Singapore T-bill is lower than the cut-off yield of 2.99% for the latest 6-month Singapore T-bill auction, this may not mean that the 6-month T-bill is definitely better than the 1-year T-bill. 

To decide if it is better to buy the 1-year T-bill or the 6-month T-bill, the question I will ask is whether I should lock-in the yield for 12 months, or face potential re-investment risk if government bond yields were to fall sharply in 6-months’ time. 

According to the CME Fedwatch Tool as of 17 January 2025, investors are expecting one potential interest rate cut in June this year. 

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 August. 

We will have to keep a close watch on interest rate trends, especially with the volatility in US government bond yields in recent months. 

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.

For the upcoming 1-year T-bill auction on 23 January 2025, the issue date will be 28 January 2025, and the maturity date will be on 27 January 2026. 

If we are not looking to re-invest our funds into the next T-bill, we will potentially lose 13 months of CPF interest by investing in the 1-year T-bill using our CPF savings.

However, we will need to transfer funds back to our CPF OA account immediately when the T-bill matures, given that the maturity is very close to the end of the month

To find out how much more interest you can potentially earn on your CPF savings by investing in the 1-year T-bill, check out our CPF-Tbill calculator. 

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 2.60% p.a. 

This would be much lower than the latest closing yield of 2.80% on the 1-year T-bill. 

What would Beansprout do?

The current closing yield of the 1-year Singapore T-bill of 2.80% is lower than that of the 6-month T-bill. 

However, we may still consider the 1-year Singapore T-bill over the 6-month Singapore T-bill to lock in the interest rates and not worry about re-investment risk.

At the same time, the current closing yield of the 1-year T-bill of 2.80% is higher than the best 1 year fixed deposit rate of 2.60% p.a.

Alternatively, we can also look for other ways to earn a higher yield on our cash.

The auction will be held on Thursday, 23 January 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 22 January (Wednesday).

Stay updated on the next T-bill

Sign up to receive a free email reminder when the next Singapore T-bill auction is open.

Subscription preferences

• Reminder for Tbill

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 22 Jan (Wed). Read our step-by-step guide to applying via DBS.
• Application for T-bills online using CPF OA via OCBC close at 9pm on  22 Jan (Wed). Read our step-by-step guide to applying via OCBC
• Applications for T-bills online using CPF OA via UOB close at 9pm on 21 Jan (Tue) 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.

Join the Beansprout Telegram group get the latest insights on Singapore bonds, stocks, REITs, and ETFs.