I’ve been getting questions about estimated yield for the next 6 month T-Bills, so I decided to continue with this series of T-Bills articles.
If you think there is any other information on T-Bills yields (or trends) that you want me to write on, just let me know and I will try to include in this series going forward.
In any case, the next 6 month T-Bills is on Thursday, 2 February 2023.
If you’re applying with cash, you will want to apply by 9pm on Wed, 1 February 2023.
What is the estimated yield on the next 6 month T-Bills Auction on 2 February 2023?
It is fairly clear that global interest rates have come down meaningfully since the start of the year.
As shared in yesterday’s macro piece, I do think this is troubling because it has the potential to create a meaningful recovery in growth – which will prevent inflation from going down.
Which will necessitate the next round of monetary tightening.
Which means that if interest rates come down too soon, inflation may go back up, requiring even higher interest rates down the road (and to stay there longer).
I don’t think the market is pricing this in at all, which will be a very troubling development.
But in any case, coming back closer to home – the short term impact is that risk assets are up, and interest rates are down for now.
And I think you’ll probably see that reflected in lower T-Bills interest rates.
6 month T-Bills trade at 4.00%
Latest 6 month T-Bills trade at 4.00% on the open market.
12 week MAS Bills trade at 4.13%
While the latest 12 week MAS Bills trade at 4.13%.
Estimated yield of 3.95% – 4.05% for the 6 month T-Bills?
As shared above, the interest rate trend is very firmly down since the start of the year.
And all the recent T-Bills auctions have a cut-off yield that came in squarely below the market pricing.
Looking at this, I think you might see the next 6 month T-Bills auction come in at around 3.95% – 4.05%.
Give or take 0.1% either way.
You can buy T-Bills with CPF-OA online via DBS now
Just a quick shoutout that if your CPF-IA account is with DBS, you can now buy T-Bills using CPF-OA online via the DBS internet banking website.
You must have your CPF-IA account with DBS though.
And from what I know, UOB or OCBC have not implemented this yet.
Very convenient if you want to buy T-Bills with CPF-OA, saves you easily an hour at the bank.
I will do a more detailed article explaining how to do it, so keep a look out for that.
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Fixed Deposit a much better buy than 6 month T-Bills?
As shared previously – I think T-Bills are only worth it if you get a meaningful yield premium vs fixed deposit.
With fixed deposit you can technically break it any time to get your money back (for a small penalty), and this optionality alone is worth something.
Whereas with T-Bills, technically you can sell it over the counter (OTC) via your bank, but realistically the liquidity is so thin for retail investors that your chance of being able to sell before maturity is quite slim.
Fixed Deposit from RHB yields 4.28% for 12 months
On fixed deposits – you can get 4.28% on a 12 month fixed deposit from RHB right now.
This is only for the Cecil Branch though, and you do need to go down in person to queue for it.
Compared to 3.87% on the latest 12 month T-Bills, I think you’re better off just putting the cash in fixed deposit instead.
If you want something more straightforward (and a local bank), you can use OCBC’s 8 month fixed deposit for 4.08%.
It can be done online too, and saves you the hassle.
You do need to have an OCBC360 account to enjoy these promo rates, but as long as you already have an OCBC online banking account it should be relatively painless to open one.
My personal views on T-Bills interest rate trend?
If you ask me, I think we might see a short term period of weakness for T-Bills interest rates, as the market prices in a soft landing and recovering growth.
But as this plays out, inflation may start to return, and the Feds may be forced to take interest rates higher for longer.
Which could mean that T-Bills interest rates go down short term, but go back up later in the year.
But hey, that’s just my view, and I could be wrong.
In any case, the debate between Fixed Deposit vs T-Bills is a straightforward one.
You buy Fixed Deposit when FD rates are higher, you buy T-Bills when T-Bills rates are higher.
For now Fixed Deposit rates are higher, so if you ask me I’m probably going to put my cash into Fixed Deposit instead.
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With T bills interest rate falling below 4%, not worth buying T bills. Get better returns from fixed deposit by licensed foreign banks or even from stocks.
Yeah fair enough. Although I dont think the stocks is a fair comparison, because you’re taking on a very different risk with stocks. 😉