Latest T-Bills at 4.19% yield! – Time to start buying?

 

Latest T-Bill auction results are out!

4.19% for the 6 month T-Bills.

Which are very, very attractive indeed.

Remember, T-Bills are backed by the Singapore government and pretty much risk-free.

So this is a pretty attractive return.

 

Allotment Results of latest T-Bills (4.19%)

Allotment wise – we still see 100% of non-competitive applications allotted:

Cut-off yield is 4.19% as shared above:

How High will T-Bills go this cycle?

In my recent article, this was what I shared:

“Latest Futures markets are pricing in a peak US Fed Funds Rate of about 4.75 – 5.25%, by mid 2023.

…

Let’s be conservative and assume SGD interest rates peak slightly below US interest rates.

I think realistically, you could see T-Bills trade anywhere from 4.25% – 5.0% by end of this cycle.”

Time to start buying T-Bills?

So with the latest round of T-Bills at 4.19% very close to the bottom end of my range, I think we’re very rapidly approaching the interest rate end game here.

Sure, I don’t think we’re at cycle peak just yet, and there’s probably room for T-Bill rates to go up a bit more.

But at these kind of numbers, I think it would make sense for me to start locking in some T-Bills at 4%+ rates.

But because of the lack of liquidity, I’ll probably still be setting aside cash in Singapore Savings Bonds and savings account (like Trust Bank or DBS Multiplier).

I do want the opportunity to add to positions in the event of any market liquidity event.

The exact proportion of liquid cash, T-Bills or Singapore Savings bonds – is ultimately up to each investor to decide.

 

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Key Features of T-Bills

To recap the key features of T-Bills, they are:

Risk Free

Backed by the Singapore government, this is as close to risk free as it gets

High short term interest rates

The latest Singapore Savings Bonds yields 3.08% for one year, and the latest Fixed Deposit yields 3.33% for one year.

While T-Bills yield 4.19% for 6 months, and 3.72% for 12 months.

In rapidly rising interest rate climates (like right now), very few products out there will be able to match the interest rates on T-Bills.

Can be bought with CPF-OA (and SRS / Cash)

And interestingly, you cannot use CPF-OA funds to buy Singapore Savings Bonds or Fixed Deposit.

But you can use them to buy T-Bills.

With T-Bills at 4.19%, it’s a healthy 1.69% higher interest than CPF-OA’s 2.5% (after the first $20,000).

I did an analysis on whether it makes sense to use CPF-OA to buy T-Bills, check out the full article here if you are keen.

How to Buy T-Bills as a Singapore Investor, using Cash, SRS or CPF?

If you’re keen to buy T-Bills, check out our recent article here on how to buy T-Bills using Cash, SRS or CPF.

 

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