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All you need to know about T-Bills Singapore [November 2022]

01 Nov 2022

Can't get enough of the Singapore Savings Bond (SSB)? It's time to look at the Singapore Government Securities (SGS) bonds and T-bills Singapore.

Singapore T-bill SGS Bond

TL;DR

  • Singapore Government Securities (SGS) bonds and T-bills Singapore are fully backed by the Singapore government, and offer you a sound way to earn a regular interest payment.
  • SGS bonds have a maturity of 2 to 30 years, while T-bills Singapore have a shorter maturity of 6 or 12 months. 
  • The yield of the 6 month T-bill Singapore rose to 4.00% in November, after the US Federal Reserve hiked interest rates aggressively. 
  • Compared to the SSB, investors of SGS bonds may face less flexibility transacting on the SSBs after issuance. As such, investors should take note of interest rate risks or be prepared to hold the SGS bonds/T-bills Singapore till maturity.

This post was updated in November 2022 to reflect the latest Singapore treasury bills auction dates.

What happened?

After our recent article on Singapore Savings Bonds, one of the most common questions we received was why not invest in Singapore Government Securities (SGS) bonds instead?

For those who are new to T-bills Singapore, read on to find out more about:

  1. What are SGS Bonds and T-Bills Singapore?
  2. Why should I care about SGS Bonds and T-Bills Singapore?
  3. What are the risks of buying SGS Bonds and T-Bills Singapore?
  4. Should I buy SGS Bonds and T-bills Singapore with CPF?
  5. How do I buy SGS bonds and T-bills?

For those who are familiar with T-bills Singapore, you can check out our glossary here:

How to 

Comparing T-Bills Singapore with other instruments

Upcoming Issuances

Insights from past issuances

All questions on T-bills Singapore compiled and answered

What are SGS Bonds and T-bills Singapore

Like the Singapore Savings Bonds, SGS Bonds and T-bills Singapore are fully backed by the Singapore Government.

They offer a sound way for you to diversify your investment portfolios, while earning a regular interest payment. 

Graphical user interface, application, Teams

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Source: MAS

SGS Bonds have a maturity of 2 to 30 years, and pay a fixed coupon every 6 months.

T-bills Singapore have a shorter maturity of 6-months or 1 year.

Essentially, to decide between a SGS bond and a T-bill Singapore, you just need to think about whether you would want to hold on this bond for a short period of time (6 months/1 year), or for a longer period of time. 

Graphical user interface, text, application

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Source: MAS

Why should I care about SGS bonds and T-bills Singapore?

While everyone has been focusing on the attractive yields for the Singapore Savings Bonds, the yields on the SGS Bonds and T-bills Singapore have been going up too.

This is not a surprise, since the coupon for each SSB issuance is linked to long-term SGS yields. 

But what we really want to focus on here are the short-term yields on the Treasury bills.

Here, the yield on the 6 month government bond has reached 4.00% recently. 

It has risen sharply due to Fed hiking interest rates aggressively to fight inflation. 

6-month T-bill yield.png
Source: Tradingview

What are the risks of buying SGS bonds and T-bills Singapore?

All investments come with risks, even for the SGS bonds and T-bills Singapore.

#1 - Less flexibility compared to SSBs

Like any other bonds, the SGS is subject to interest rate risks. This means that when interest rates go up, the price of the bond may come down. Hence, you might suffer capital losses if you were to sell the bond before its maturity date. 

If liquidity is important to you, this is something you will need to be aware of before buying the SGS bonds. 

This is where the T-bills Singapore might come in handy, as they have a shorter maturity period compared to the SGS bonds. 

As a result, you are committing to a shorter period of 6 months or 1 year, where hopefully the likelihood of you having to sell the bond is also lower. 

If you want the flexibility of redeeming your investment in any given month, do consider the Singapore Savings Bonds as an alternative.

#2 - Less easy to buy and sell after issuance

After you have been issued the SGS/T-bill Singapore , it may not be easy to buy or sell them in the secondary market before they mature. 

You will have to visit the main branches of the banks (DBS, OCBC or UOB), and indicate whether you are using cash, SRS or CPF Investment Scheme (CPFIS) funds.

Thereafter, the bank will provide you with a quote on the T-bill Singapore 

So while it is doable, it will not be as straightforward as pressing a button on your ibanking app!

#3 - No certainty on expected yield at the point of subscription. 

It is worth noting that there are allotment limits for competitive and non-competitive bids at each auction.

Most bids by individual investors are put through the non-competitive bids. Corporates and professional fund managers are more likely to put up a competitive bid. 

Looking at the last auction for the 6-month T-bill Singapore on 21 July, there was a total of S$190 million of non-competitive bids put in. 

All the non-competitive bids were allotted the 6-month T-bill Singapore at a yield of 2.92%. 

However, if you were subscribing to the T-bill Singapore , you would not know what is the yield you are getting at the point of subscription. 

It is eventually determined based on demand and supply at the auction. If there is sudden spike in demand for the T-bill Singapore, then you might be getting a lower yield. 

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Source: MAS

The other thing to note here is that T-bills Singapore do not have coupon payments; instead, they are issued to you at a purchase price that is below the face value of the bond. Therefore, the yield that you get at maturity is the difference between the purchase price and the face value.

Sounds complicated? Here's how it works.

Using the 1-year T-bill Singapore as an example, it has a face value of S$100. This is the amount of money you will receive for holding the bond till maturity, which in this case is 1 year.

If you pay $98 for purchasing the bond, your yield for holding on to the bond for one year can then be calculated as (S$100-S$98) / 98 x 100 = 2.04%.

In other words, you would have earned a return of 2.04%, having paid S$98 upfront, and receiving S$100 in one year's time.

Should I buy SGS Bonds and T-bills Singapore with my CPF?

The yield on the T-bill Singapore is now higher than the prevailing CPF interest rate. Read our analysis on whether it makes sense to invest in the T-bill Singapore using your CPF.

Also, do note that the use of CPFIS funds for investing in T-bills Singapore is subject to CPF investment guidelines.

You can invest your OA savings after setting aside $20,000 in your OA. And you can invest your SA savings after setting aside $40,000 in your SA.

How do I buy SGS bonds and T-bills Singapore?

These are the upcoming key dates you need to know. You may check the full schedule of upcoming auction here.

IssuanceAuction Date
6-month T-bill Singapore24 November 2022

What you will need for cash application: You can apply through DBS/POSB, OCBC and UOB ATMs and internet banking portal. You will also need an individual CDP account with Direct Crediting Services activated . This allows coupon and principal payments to be credited directly into your bank account.

What you will need for SRS application: You  can apply through the internet banking portal of your SRS Operator (DBS/POSB, OCBC, or UOB).

What you will need for CPFIS Application: You will need to submit an application in person at the main branch of your respective CPF Investment Scheme (CPFIS) agent bank (DBS/POSB, OCBC, or UOB). For CPFIS-OA investments, you will need a CPF Investment Account with one of the three CPFIS agent banks (DBS/POSB, OCBC, and UOB). There is no need to open any CPF Investment Account if you wish to invest CPFIS-SA funds.

Applications through ATMs and internet banking may close 1 to 2 business days before the auction, as your bank will need to process the application before the auction closes. Do check with your bank for the exact cut-off time for the different application channels.

The minimum bid amount for SGS bonds and T-bills Singapore is S$1,000. So you need to start by deciding how much you want to invest, in multiples of S$1,000.

For new SGS/T-bill Singapore issues, the full bid amount will be deducted from your account at the point of application. So do make sure you have sufficient funds in the account you are using to apply. 

If your bid is unsuccessful, the money will be refunded into the account used to make the application. The refund will be shown in your account 1-2 business days after the auction day.

How do I know if my subscription is successful?

After an auction closes, you can check the aggregate results of the auction about an hour later on the issuance calendar.

The SGS bonds or T-bills Singapore are issued 3 business days after the results are announced.

If your bid is successful, the securities will be reflected in your respective accounts after the issuance date. 

  • For cash applications: You can check your CDP statement
  • For SRS application: You can check the statements from your SRS Operator (DBS/POSB, OCBC and UOB are SRS operators)
  • For CPFIS-OA application: You can check the CPFIS statement sent by your agent bank (DBS/POSB, OCBC and UOB are CPFIS agent banks)
  • For CPFIS-SA application: You can check your CPF statement

 

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