In tandem with the rise in global interest rates, the popularity of treasury bills (T-bills) has soared. On top of paying attractive interest returns, T-bills also help shield investors from the stock market volatility – while still paying a guaranteed return, and guaranteeing our investment.
We can invest in T-bills using our cash, CPF OA savings and SRS savings to earn a better interest return. When investing in T-bills, we should pay close attention to the key dates. These are all listed on the MAS website.
Source: MAS
(In this example, we use the 6-month T-bills; All 6-month T-bill stats used in the article is taken from the MAS website.)
For example, in the table above, we can see the:
#1 Announcement Date: We can start applying for the T-bills on this date.
#2 Auction Date: The auction results will be released on this date. Often, we can apply for the T-bills up to 1 to 2 business days before the auction. We need to check with our bank for the exact cut-off time.
#3 Issue Date: When the T-bills are issued to us (and we start earning the interest return). This is 3 business days after the Auction Date.
#4 Maturity Date: The date when a particular T-bills issuance matures. This is 6 months or 1 year after the issue date of the respective 6-month and 1-year T-bills.
Each year, these key dates will be released by October/November for the following year’s T-bill issuances.
Some writers on the DollarsAndSense team have invested in the T-bills, and we think it makes the most sense to apply only on the last day of the auction.
Read Also: Treasury Bills (T-bills): What Are They And How You Can Buy Them
Don’t Lose Out On Additional Interest Returns Elsewhere
Typically, when we use our cash to invest in T-bills, our funds will be taken out of our accounts immediately. If we were to invest on the last day of the auction (i.e. usually 1 day before the auction date), our funds can continue earning interest returns for a few more days within our high-interest savings account.
This amount of lost interest may become more significant if we are using our CPF OA savings to invest in T-bills. While our CPF OA savings earn a floor interest of 2.5% per annum, what some may not know is that we only get paid interest on our lowest balances in the month.
Source: CPF
This also means applying for the T-bills at the start of the month is more sensible than at the end of the month. For example, if we are intending to invest our CPF funds in T-bills this year – there are 5 remaining tranches. Rather than invest in the October T-bills, we could consider investing in the early-November T-bills. This is because our CPF funds will be withdrawn at the start of the month rather than at the end of it.
If we invest our CPF OA funds in the October T-bills, we would lose the entire 2.5% interest on our funds for October, despite keeping it within the account for the majority of the month.
While these amounts may not seem like much, they are still additional interest we could have earned. And, if we are investing large sums of money, they can also be quite sizeable.
Take Advantage Of Having More Information To Make Your Decision
If we wait till the last possible day to invest, we will also be armed with more information about the economy and interest rate environment.
For example, earlier in the year, we saw multiple strong banks, such as Silicon Valley Bank and Signature Bank, fail within a few days and without warning. Within 48 hours between 8 to 10 March, Silicon Valley Bank went from a prestigious start-up bank to being taken over by US regulators.
If we had invested in the early-March T-bills on its announcement date (9 March 2023) rather than waited till the last possible date (16 March 2023), we may have inadvertently lost some opportunities. Perhaps, we may have wanted to invest in depressed bank stocks, or even kept up-to-date with information of a potential slowdown in interest rate hikes – and not want to invest in T-bills this round.
The events in March actually led to the lowest cut-off yield as well – and we may have been able to avoid investing if we did not want to. With the benefit of hindsight, we can also see that rates bounced back in the following launch to 3.85%. In fact, the T-bills launched on 16 March has been the lowest cut-off yield offered on T-bills for the entire year, so far.
| No. | Auction Date | Cut-Off Yield |
| 1 | 18 Jan 2023 | 4.0% |
| 2 | 02 Feb 2023 | 3.88% |
| 3 | 16 Feb 2023 | 3.93% |
| 4 | 02 Mar 2023 | 3.98% |
| 5 | 16 Mar 2023 | 3.65% |
| 6 | 30 Mar 2023 | 3.85% |
Besides unexpected events, we can also stay updated with potential news that may affect interest rates. For example, the US Bureau of Labor Statistics release its employment report on the first Friday each month. We may wish to avoid or look at these statistics before investing in T-bills.
Source: US Bureau of Labor Statistics
We may also wish to wait till the Fed has delivered its updates on interest rates after its Federal Open Market Committee (FOMC) meeting.
Source: Forbes
The content from these meetings may shift our position on whether we want to invest in T-bills. We can already see that in November and December, there may be T-bills issuance that are announced before the FOMC meeting, but only close after it.
Read Also: Singapore Treasury Bills (T-bills): What Is Cut-Off Yield, Median Yield, And Average Yield
Strangely, Internet Banking Has Been Relatively Unstable This Year
While it’s understandable that we may want to wait till closer the auction date to apply for our T-bills, there may be merits in not leaving it till the last minute.
While we can invest our cash, SRS and CPF OA savings in T-bills via ATMs or internet banking platforms, there have been several instances when local banks suffered downtime this year.
For example, DBS suffered a service disruption on 29 March 2023 and another time on 26 September 2023. This may have affected those who were waiting till the last few days to apply for the end-March T-bills (between 23 to 30 March 2023) and end-September 2023 T-bills (between 21 to 28 September 2023).
While investors may have had time for their investments to go through when the service came back online, they may have had suffered some anxiety over whether their investments would go through. According to reports, in the September 2023 outage, some transactions had pending status till 29 September 2023.
Leaving it till the last minute, and realising that we have to go down to the bank in-person may mean we have to skip the latest issuance. We will also need to open a CPF Investment Account with one of the 3 local banks to do this.
Similarly, any other hiccups we face at the last minute can mean having to skip the latest T-bills issuance – and end up costing us at least 2 weeks of interest till the next 6-month T -bills issuance, and 3 months for the next 1-year T -bills issuance.
Read Also: Step By Step Guide To Buying T-Bills Online Using Your CPF OA Savings
The article was first published on 27 March 2023 and has been updated with the latest information
The post Applying For Singapore T-Bills: Why You Should Only Apply On The Last Day appeared first on DollarsAndSense.sg.
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