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Bonds and Fixed Income

Guide To Buying US T-Bills For Singapore Investors

US Treasury bills are offering 5.5% after the latest rate hike.

US Government Treasury Bills (T-bills)

In the past two years, the US Federal Reserve has raised benchmark interest rates 11 times to 5.25%-5.50%. In comparison, the US benchmark interest rate was 0.25% to 0.50% in March 2022.

While this has raised the US Treasury Bills (T-bills) to 5.25%-5.50%, the latest Singapore Government T-bills only paid an interest rate of 3.75%. As a result, many Singapore investors may be more interested in exposure to the US Government T-bills to potentially earn higher interest rates.

Why Is The US Government T-Bills Paying A Higher Interest Rate?

For those who want to invest in the US Government T-bills, we must pay attention to forex risk. Exchange rate fluctuations between the USD and Singapore Dollar (SGD) may affect our returns.

The markets are created to be efficient. What this means is that we cannot simply think that we will earn a better return by exchanging our SGD to USD. In economics, this concept is termed “interest rate parity”. Thus, a higher US interest rate means that the market expects the SGD to strengthen against the USD by a similar level.

If we believe that the USD will remain strong over the next year, then it could make sense to invest in US Government T-bills. If we think the USD will depreciate against the SGD, then holding our money in SGD might be wiser.

Nevertheless, buying the US Government T-bills can be a logical investment, especially if we are already holding US Dollars (USD) for investment purposes or future use. Historically, there is also a flight to the USD in times of global uncertainties – and there is currently great uncertainty in the global geopolitical and economic environment.

At the tail-end of 2023, US credit rating was also downgraded by both Fitch and Standard & Poor’s. US credit no longer holds an AAA rating, and has been downgraded to AA+. Typically, a lower quality credit rating should mean higher returns.

What Are US Government T-Bills?

US Government T-bills are debt securities issued by the United States Department of the Treasury. They are backed by the US Government, and used to fund daily operations and investments of the federal government.

The US Government issues several types of securities that we can invest in, such as the: 1) Treasury Bills (maturity of 4, 8, 13, 17, 26, 52 weeks); Treasury Notes (maturity of 2, 3, 5, 7, 10 years); Treasury Bonds (maturity of 20 years and 30 years); Floating Rate Notes (maturity of 2 years, and pay the rates paid by the 13-week T-bills); Treasury Inflation-Protected Securities (TIPS) (maturity of 5, 10 and 30 years, principal is adjusted by changes in the Consumer Price Index); Separate Trading of Registered Interest and Principal of Securities (STRIPS) (enables investors to trade individual interest and principal components of the Treasury Notes, Bonds and Bills).

In this article, we focus on the US Treasury Bills (T-bills). Like Singapore Government T-bills, they are auctioned off and sold at a discount to their face value – which means our returns is the difference between the discounted rate (that we pay when investing) and the face value (we receive when the T-bill matures).

Here are 4 ways to invest in the US Treasury Bills from Singapore.

Read Also: 6 Month Vs 1-Year Treasury Bills: Understanding The Differences And Choosing The Right Option

#1 Invest via TreasuryDirect

TreasuryDirect is run by the US Department of Treasury, and enables investors to buy US T-bills directly from them. This is both the simplest and most complicated way for Singapore investors to gain exposure to US Government T-bills.

It is the simplest way to invest as there are no additional commissions or fees that we have to incur when applying for a T-bill tranche. The various types of US Government securities are also listed on its Auction calendar.

However, it is also the most complicated way to invest in US T-bills for Singapore investors. While foreigners can open a TreasuryDirect account, we need to do exactly that – open a TreasuryDirect account. Apart from account documents, we also need a Tax ID, and have to complete the IRS (Inland Revenue Service) Form W-8 each time we want to invest in a US Government T-bill. We will also need to pay and receive funds via a US bank account.

#2 Buy US Treasuries On The Secondary Market

Fortunately, we can buy US Government T-bills (and other types of US Government Securities) via the secondary markets. We can use brokerages such as IBKR to search for US Government T-bills we can invest in. As you can see in the screenshot below, IBKR has a Bond Search Tool, and there are 789 US Treasuries that we can invest in (as of 12 Apr 2024).

IBKR US T-bills investment

Source: IBKR

We can also invest in US T-bills with other bond platforms, such as FSMOne. FSMOne also has a Bond Selector tool that allows us to search United States Treasury Bills.

FSMOne buy US T-bills

Source: FSMOne

Similarly, we can buy US T-bills on POEMS (by Phillip Securities). On its platform, we simply need to select the “Bonds” tab, and search for “US Treasury”.

POEMS US T-bills investments

Source: POEMS

Do note that when we invest on the secondary market, we will likely incur a brokerage commission charge. The good thing is also that we can sell off the US T-bills if we prefer.

Read Also: Investing With Interactive Brokers (IBKR): Here’s What Investors In Singapore Need To Know

#3 Invest in US Treasury Bond ETFs

We can also invest in ETFs that hold US T-bills. Since we are investing in ETFs, we will also incur brokerage commissions.

Rather than investing in individual T-bills, though, we can gain exposure to various T-bills. We also don’t have to worry about a maturity date as our investments will be rolled into new T-bills issued by the US Government. This also means we do not have to continuously incur brokerage commissions to retain exposure to US T-bills over a period of time.

For example, we can invest in the SPDR Bloomberg 1-3 Month T-Bill ETF (Ticker: BIL) via our regular stock brokerage account. We took a screenshot of the ETF from our Tiger Brokers app (below) to highlight how easy it can be. This process is similar to other stock brokerage accounts as well.

On the top right of the image, we can see that the factsheet of SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) states that its aim is to correspond to the 1-3 months US T-bills. Reading the factsheet further (bottom right), we will also learn that 100% of the portfolio is invested in 0-1 year US T-bills.

SPDR Bloomberg 1-3 Month T-Bill ETF (BIL)

Source: Tiger Brokers (left); SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) Factsheet (Right: Top and Bottom)

We can also search for other ETFs, such as The US Treasury 3 Month Bill ETF (Ticker: TBIL). In addition, we can also gain exposure to a mix of US T-bills and longer-dated US Government securities in other ETFs, including the Vanguard Short-Term Treasury ETF (Ticker: VGSH) and iShares 1-3 Year Treasury Bond ETF (Ticker: SHY). There are also others that we can easily research and invest in.

Read Also: Buying US Stocks In Singapore: Guide To Stock Trading Platforms And Brokerage Fees (2023)

#4 Invest in Unit Trusts That Hold US T-Bills

Another way we can gain exposure to US T-bills is via unit trusts or mutual funds. We can invest via unit trusts or mutual funds. One way is via the dollarDEX platform, where we can search for mutual funds to invest in.

For example, the Fidelity US Dollar Bond Fund has close to 58% exposure to US Treasuries, with the rest of its portfolio comprised of fixed income exposure to mainly banks (over 17%) and other sectors.

Fidelity US Dollar Bond Fund

Source: Fidelity US Dollar Bond Fund

Another example is the CSOP USD Money Market Fund – where close 23% of the fund has exposure to various US T-bills. We can invest in such a fund via our brokerage platform, like moomoo. The rest of the fund is invested in fixed deposits by China banks.

CSOP USD Money Market Fund

Source: moomoo

We can also gain exposure in T-bills via unit trusts that aim to track the returns of US Treasuries. For example, via the Endowus Fund Smart platform, we can invest in the PIMCO GIS Low Duration Income Fund.

While the fund only has a 1.1% exposure to US Treasury securities, it also comprises securities issued by the Federal National Mortgage Association in the US.

PIMCO GIS Low Duration Income Fund

Source: Endowus

Read Also: Understanding Endowus: How This FinTech Investment Advisor Will Help S’pore Investors Access Superior Global Portfolios At Low Cost

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