Introduction and features of T-bills
What is the T-bill?
- T-bills are short-term, tradable debt issued by the Singapore government.
- T-bills have a maturities of 1 year or less.
What is the difference between T-bill to SGS Bonds?
- SGS bonds have a maturity of 2 to 30 years, while T-bills have a shorter maturity of 6 or 12 months.
- SGS bonds pay interest every 6 months. T-bills do not have coupon payments; instead they are issued at a discount to the face value of the bond.
- You can read more about the difference here!
|Available tenor||2, 5, 10, 15, 20, 30 or 50 years||6 months or 1 year|
|Type of interest rate payment||Fixed coupon||No coupon; issued and traded at a discount to the face (par) value|
|How often interest is paid||Every 6 months, starting from the month of issue||At maturity|
|Secondary market trading||At DBS, OCBC or UOB main branches; on SGX through brokers||At DBS, OCBC or UOB main branches|
What is the difference between T-bill and SSB?
- T-bills offers a fixed interest rate, while SSBs offer interest rates that increase the longer you hold.
- T-bill have maturities of 6-months and a year, while SSBs offer a flexible investment period with a 10-year maturity.
- T-bills have a minimum investment amount of S$1,000, while SSBs have a minimum investment amount of S$500.
- For SSBs, there is an overall cap of S$200,000 per individual. For T-bills, there are caps to the limits for each auction, though such limits are typically above S$1 million.
- SSB interest rate will be determined before application and T-bill interest rate will be determined by auction.
- SSBs offers the flexibility of redeeming in any month. T-bills can be traded in the secondary market but the price may be above or below what you paid if they are sold before maturity.
|Available tenor||6 months or 1 year||Up to 10 years|
|Frequency of issuance||Fortnightly or quarterly, according to the issuance calendar||Monthly, for at least 5 years|
|Minimum investment amount||S$1,000, and in multiples of S$1,000||S$500, and in multiples of S$500|
|Maximum investment amount||None; up to the allotment limit for auctions||S$200,000 overall|
|Buy using SRS and CPF funds?||Yes||SRS: Yes; CPF: No|
|Type of interest rate payment||No coupon; issued and traded at a discount to the face (par) value||Fixed coupon, steps up each year|
|How often interest is paid||At maturity||Every 6 months, starting from the month of issue|
|Secondary market trading||At DBS, OCBC or UOB main branches||No|
|Maturity and redemption||No early redemption. Investors receive the face (par) value at maturity (i.e. price of S$100).||Can be redeemed in any month, with no penalty. Investors receive the face (par) value plus accrued interest upon redemption.|
Is the T-bill risk free?
- T-bills are fully backed by the Singapore Government and are generally seen to be safe investments.
- However, all investments come with risks, even for T-bills.
- T-bills are 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.
- T-bills are also generally less easy to buy and sell after issuance.
- There is no certainty on expected yield for T-bills at the point of subscription
- You can read more of our analysis here!
How is the T-bill different from putting my money in fixed deposit?
- The minimum investment amount for T-bills is S$1,000, while the minimum amount for fixed deposits is usually higher.
- T-bills are issued and backed by the Singapore government. Fixed deposits are insured up to S$75,000 by the Singapore Deposit Insurance Corporation Limited (SDIC).
- You can read more of our analysis here!
What is the minimum subscription amount for the T-bill?
- The minimum subscription amount for T-bill is S$1,000.
Is there a limit to how much T-bill I can own?
- There will be no limit on how much T-bill an investor can own, however there are allotment limits for auctions that are above S$1 million.
Can I sell the T-bill prior to its maturity?
- Yes, you can sell T-bill prior to maturity in the secondary market via the local agent (DBS, OCBC, UOB)
- There are risks relating to selling T-bills prior to maturity
- The price of the T-bill may fall before maturity
- The trading volume of T-bill may low
If I am not a Singaporean, can I buy the T-bill?
- All institutional and individuals, including non-residents, can buy T-bills.
- For individuals investors, you have to be 18 years old and above.
Applying for T-bill
Will I be able to know the interest rate I’m getting on the T-bill before the auction?
- No, you will not know the interest rate for T-bill before the auction.
- However, the market price of existing T-bills can provide some indication of the potential interest rate on the T-bill
- The eventual interest rate on the T-bill will be determined based on demand and supply at the auction.
What is the difference between a competitive and non-competitive bid?
- In a non-competitive bid, you only need to specify the amount you want invest, but not the yield. You may choose this option if you wish to invest regardless of the interest rate or if you are unsure of the yield to bid. By putting a non-competitive bid, you will be receiving the bond at the cut-off yield.
- In a competitive bid, you can specify the yield you are willing to accept. You may submit a competitive bid if you wish to invest in the bond only if the yield is above a certain level. However, you may not get the full amount you applied for, depending on how your bid compares to the cut-off yield.
What is the interest rate I'd get in a T-bill auction?
- All successful competitive and non-competitive bids will receive the cut-off yield.
- The cut-off yield is the highest accepted yield of successful competitive bids.
Can I submit multiple bids?
- Yes, you can submit multiple competitive bids.
- Note that a lower yield represents a more competitive bid, as you are indicating that you are willing to accept a lower interest rate.
What are some of the charges I need to be aware of when purchasing T-bills?
- For cash applications at the auction, there are no charges.
- For CPF OA applications at the auction, there will be a charge of of $2.50 + GST admin fee.
How is the yield on the T-bill calculated?
- Using the 1-year T-bill 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.
What are the key dates I need to be aware of in the T-bill application?
- The T-bill auction date is 5 business days after the announcement date. In this example, the auction date of 13 October 2022 is 5 business days after the announcement date of 6 October 2022.
- For retail investors, applications through ATMs and internet banking typically close at 9pm the day before the auction date. Applications using CPF can close even earlier, depending on the processing time required by the bank. Check with your bank for the exact cut-off time.
- The results of the auction are typically known about 1 hour after the auction.
- T-bills are issued 3 business days after the auction. In this example, the issue date is on 18 October, 3 business days after the auction date on 13 October.
- The maturity date is the date you will receive the amount you invested.
Will I get full allotment to my T-bill subscription?
- In the auction on 13 October, there was 100% allocation for non-competitive bids.
- Non-competitive bids will be allotted first, up to 40% of the total issuance amount.
- If the amount of non-competitive bids exceeds 40%, the bond will be allocated to you on a pro-rated basis.
- The balance of the issue amount will be awarded to competitive bids from the lowest to highest yields.
What do I need to purchase the T-bill?
- Before purchasing the T-bill using cash, you will need to have a local bank account (DBS, OCBC, UOB) and a CDP account.
- If you are buying with CPF, you will be required to have CPFIS account with one of the three local CPFIS agent bank (DBS, OCBC, UOB)
Purchasing T-bill with CPF
Can I purchase the T-bill using CPF?
- Yes, you can purchase T-bills using CPFIS and SRS.
- Before you can make any investment on your CPFIS, you are required to have a minimum sum of S$20,000 in your Ordinary Account and S$40,000 in your Saving Account.
What do I need to purchase the T-bill using my CPF account?
- For SRS, you will need to have an SRS account with one of the three operators (DBS, OCBC and UOB) and apply through the SRS operator’s online banking portal.
- For CPFIS, you would need to have CPFIS with one of the three agent banks (DBS, OCBC and UOB) and apply in person at any branch. You’ll need to complete the SAQ online at CPF website and screenshot/print out the result to open a CPFIS account
- You can read more on how you can purchase a T-bill using CPF here!
Should I purchase the T-bill using CPF?
- The cut-off yield on the 6-month T-bill reached 3.77% in the auction on 13 October. This is above the current CPF OA interest rate of 2.5%.
- However, you will lose at least one additional month of CPF interest payment when you use your CPF to invest in the T-bill or SGS Bond.
- As such, it is generally more worthwhile to use your CPF OA to invest in the T-bill or SGS Bond when the bond has a longer maturity or when interest rates are higher.
- There are also risks relating to investing in the T-bill, and the price of the bond could fall if interest rates go up.
- There is also no certainty on the interest rate of the T-bill at the point of application.
- You can read more about our analysis here!
Investing in T-bills
What is a bond ladder and how can I build a T-bill bond ladder?
- A bond ladder is a portfolio of bonds that have different maturities.
- A bond ladder consisting of Singapore Savings Bonds (SSBs) or Treasury Bills (T-bills) can help you to earn a passive income while reducing exposure to interest rate fluctuations.
- You can read more on how you could construct your own bond ladder here!
Why is the yield on the 6-month T-bill higher than the yield on the 12-month T-bill?
- In the auction on 13 October, the yield on the 6-month T-bill reached 3.77%. The yield on the 12-month T-bill was lower at 3.72%.
- In recent months, we have seen an inversion of the yield curve.
- An inverted yield curve is seen by some investors as a sign of a potential recession. This could be a reflection of investors’ expectations Central Banks would cut their policy rates in the future to help boost growth.
- You can read more about the yield curve here!
Any other questions?
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