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Treasury Bills (T-bills): What Are They And How You Can Buy Them

T-bills can be a good substitute for fixed deposit accounts


One of the simplest ways to keep your excess savings is to leave it in your bank savings account. But that may not give you sufficient returns to beat inflation over the long term, especially as some savings accounts may only give as low as 0.05% per annum (p.a.) interest.

On the other hand, savings accounts with higher interest rates, such as multiplier savings accounts, may not only give you less interest as you save more, but they may also make you jump through more hoops to get the higher interest rates.

One option to earn a higher return on your excess money is to invest in the Treasury Bills issued by the Singapore Government. These debt instruments allow you to earn a higher return that is based on the current market environment.

Here’s what you need to know about Treasury bills (T-bills) and how you can buy them in Singapore.

Read Also: Best Savings Accounts In Singapore – If You Don’t Want To Keep Jumping Through Hoops

Treasury Bills (T-Bills) Are One Of The Four Types Of Singapore Government Securities (SGS)

The debt securities that are issued by the Singapore government are collectively known as Singapore Government Securities (SGS). These SGS are considered safe investments as they are fully backed by the Singapore government, which has the strongest credit rating accorded by international credit rating agencies, signifying the lower risk of default.

Rating Agency Local Currency Foreign Currency
Moody’s Aaa Aaa
S&P AAA AAA
Fitch AAA AAA
R&I AAA AAA

Source: MAS

There are four types of SGS: Treasury bills (T-bills), SGS bonds, Singapore Savings Bonds (SSB), and Cash Management Treasury Bills (CMTBs).

Treasury bills (T-bills) are short-term bills that are offered in either a 6-month or 1-year tenor. They are also called “zero coupon bonds” because they don’t pay interest during the life of the bond. Instead, they are sold at a discount to their face value, which the investor will get back at full value upon maturity.

For example, if you applied successfully for $1,000 worth of 1-year T-bills at 2% interest per annum, you would only need to pay around $980. When the bond matures, you will receive the full lump sum of $1,000, which includes the $20 interest.

Read Also: [2022 Edition] Complete Guide To Buying Singapore Savings Bonds (SSB)

Treasury Bills (T-Bills) Are Issued To Develop Singapore’s Debt Markets

The Treasury bills and SGS bonds (Market Development) are issued by the government primarily to develop the local debt markets. The issuance of these bonds serves three main reasons.

The first is to build a liquid SGS market to provide a robust government yield curve to serve as a benchmark for the pricing of private debt securities.

Second, is to foster the growth of an active secondary market for both cash transactions and derivatives to enable efficient risk management.

And the third reason is to get both domestic and foreign issuers and investors to participate in the Singapore bond market.

Features of T-Bills

Treasury bills (T-Bills) have their own unique features, and here’s what you need to know.

The T-Bills can be bought by both institutions and individuals, including non-residents, over the age of 18 years old.

The minimum investment amount in T-bills is $1,000, with subsequent increments of $1,000. There is no maximum amount that an individual can hold, but there are limits—up to $1 million in non-competitive bids—for each auction.

The T-bills are sold on a uniform price auction method, which requires settlement within T+3 days.

T-Bills And SGS Bonds Are Sold Under A Uniform Price Auction Method

As opposed to the Singapore Savings Bond (SSB), which is based on a “quantity ceiling” format, the SGS and T-bills are issued via a uniformed-price auction. Successful bids or applications will be given out at the uniformed yield, which is the highest accepted yield (or cut-off yield) of successful competitive bids submitted at the auction.

When applying for T-Bills or SGS bonds, investors will be required to choose between making a competitive or non-competitive bid.

Competitive Bid Vs Non-Competitive Bid

A competitive bid is one that requires you to specify the price (to be expressed in terms of percentage yield, up to two decimal places) that you are willing to pay for the SGS bonds or T-bills. A lower yield represents a more competitive bid.

A non-competitive bid is one in which you do not need to specify a price and instead will be allotted the SGS bonds or T-bills at a uniform yield based on the results of the competitive tenders. This could be a better choice for retail investors, who might not know enough to put in a competitive bid.

Additionally, all non-competitive bids will be satisfied first, before the balance is then awarded to those who have submitted competitive bids. You stand a higher chance of securing your allotment with a non-competitive bid.

Read Also: How Is The Interest Rate Derived For The Singapore Savings Bonds (SSB) And Why It Is Increasing?

6-Month and 1-Year Treasury Bill Rates Historically

Here’s a look at the past historical rates for the 6-month T-bills from September 2019 to September 2022. The short-term interest rates began rising in 2022 as the Federal Reserve of the United States started raising its interest rates.

Here’s a look at the past historical rates for the 1-year T-bills from September 2019 to September 2022. The 1-year rates follow a similar trajectory as the 6-month interest rates.

Should You Invest In T-Bills?

Given that individual investors can buy different kinds of bonds, here are some factors to think about if you want to add T-bills to your portfolio.

T-bills are a safe, short-term investment option that can be used for diversification of your investment portfolio. It allows you to receive a fixed interest payment at maturity.

Nevertheless, investments in T-bills or bonds generally might not generate sufficient returns to beat inflation in the long term. Therefore, the T-bills should be considered in totality with your other assets rather than being the only choice of investment.

Additionally, as the interest rates are determined based on a uniform-price auction, there is no certainty as to the interest rate that you will receive when you apply for T-bills. In the worst-case scenario, you may have to accept negative interest-bearing T-bills.

Lastly, selling the T-bills before maturity may result in losses as the bond prices may fluctuate depending on the market interest rate environment.

Read Also: 6 Investments In Singapore That Provide Guaranteed Principal And Returns

How To Buy T-Bills In Singapore

The 6-month T-bills are issued every two weeks, while the 1-year T-bills are issued every three months. Check out the Auctions and Issuance Calendar for details on the latest T-bill issuances.

You can buy the T-bills using cash, supplementary retirement scheme (SRS) funds, or CPFIS Investment scheme funds. Here’s the process using the three methods.

Cash Applications

To buy T-bills using cash, you need a bank account with one of the three local banks (DBS/POSB, OCBC, and UOB). You will also need an individual Central Depository (CDP) account with direct crediting services activated. This is to allow your coupon and principal payments to be credited directly to your bank account.

Once prepared, you can apply for the T-bills through the local banks’ ATMs and internet banking portals.

If successful, the transaction would be reflected on your CDP statement.

Read Also: Step-By-Step Guide To Opening A CDP Account In Singapore

SRS Applications

To buy T-bills using SRS, you need an SRS account with one of the three SRS operators (DBS/POSB, OCBC, and UOB). After that, you can apply for T-bills through your SRS operator’s online banking portal.

If successful, the transaction would be reflected in the statements issued by your SRS operator.

Read Also: Step By Step Guide To Opening Your Supplementary Retirement Scheme (SRS) Account

CPFIS Applications 

To buy T-bills using CPFIS-OA investments, you would need a CPF Investment Account with one of the three CPFIS agent banks (DBS/POSB, OCBC, and UOB). Unlike the above options, you would need to submit an application in person at any branch of the CPFIS bond dealers (DBS/POSB, OCBC, and UOB) when buying using your for CPFIS-OA account.

If successful, the transaction would be reflected on your CPFIS statement sent by your agent bank.

Read Also: 7 Types Of Investments You Can Make Using Your CPF OA Monies Via The CPFIS-OA

How To Sell T-Bills In Singapore

If you need to sell your T-bills before the maturity date, you can do so with any of the three local banks by visiting their main branches.

However, do note that, depending on the market conditions, the price of the SGS T-bills might be higher or lower than what you paid.

Read Also: 4 Investments That Naturally Hedges Against Inflation In Singapore

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