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Understanding T-Bill in Singapore

In Singapore, T-bills refer to Treasury bills, which are short-term debt securities issued by the Singapore government. They are sold at a discount to their face value and mature within one year or less, making them a popular investment option for individuals and institutions looking for a relatively safe place to park their money for a short period of time. T-bills are usually sold through auctions, and their yields are determined by market demand and supply. In Singapore, T-bills are issued by the Monetary Authority of Singapore (MAS) on behalf of the government.

From March 2023, all three major banks in Singapore will offer customers the option to use their Central Provident Fund (CPF) savings to apply for Treasury bills (T-bills) online. This is great news for customers who previously had to queue up at the banks for hours to access this service. DBS has already started offering this option since late January, and they have reported that nine in 10 T-bill applications for the 2 Feb 2023 auction were made online using CPF funds.

With the CPF Ordinary Account (OA) paying a minimum of 2.5% interest per annum, it makes sense for savers to use their CPF savings to invest in T-bills, which are currently paying north of 3%. However, before jumping into this investment, it’s essential to note a few things.

First, be careful of lost interest in CPF and T-bills. If you choose to use your CPF savings to invest in T-bills, you could lose more than six months of CPF accrued interest. To participate in a T-bill auction, you need to put in a bid before the auction date, which means there will be a period during which your CPF OA money does not earn interest.

Secondly, T-bill yields have fallen since hitting a 30-year high of 4.4% p.a. in December 2022. The T-bill sold in the 16 Feb 2023 auction offered a six-month yield of 3.93%. The yields of Singapore T-bills track those of US Treasuries, which have also fallen as the US Federal Reserve (Fed) narrows its interest-rate hikes. While Singapore T-bills remain at levels higher than a year ago, investors need to keep an eye on the yield trend ahead.

Therefore, before investing all of your CPF savings into T-bills, be sure to take note of these important factors.

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