In last week’s fixed deposit article, I looked at how the best 6 month Fixed Deposit rates yielded only 2.75% (Bank of China).
Given the most recent 6-month T-Bills closed at a 3.04% yield.
It pretty much seems like a no brainer to buy T-Bills instead of fixed deposit at this point.
But if I can figure this out – I’m pretty sure everyone will figure it out too.
Which leads to the question of whether T-Bills yields will stay at 3.04%, or drop.
3 questions I wanted to discuss:
- Estimated yield on the next 6-month T-Bills auction?
- What are the alternatives to T-Bills in this market? Fixed Deposit, Money Market Funds, Bonds?
- Will I buy more T-Bills today?
Estimated yield on the next 6-month T-Bills auction? (13 Feb 2025 Auction)
The next 6-month T-Bills auction is on 13 Feb (Thurs).
This means that the deadline to apply is:
- 9pm on 12 Feb (Wed) for cash applications (and CPF-OA applications via DBS or OCBC internet banking)
- 9pm on 11 Feb (Tues) for UOB CPF-OA applications
6-month T-Bills yields rose to 3.04% at the most recent auction
In the most recent 6-month T-Bills auction, cut-off yields rose to 3.04% (was 2.99% the previous auction).
Okay the chart below doesn’t really show this point well, because yields are still down meaningfully from where they were before rate cuts in mid 2024.
But the point is that T-Bills yields have generally stabilised around the 3.0% mark of late.
Meanwhile – demand fell meaningfully from $18.4 billion to $15.3 billion.
You could argue that some of this was due to the Chinese New Year break, where most people were busy and didn’t get around to submit an application.
With the rise in T-Bills yields, I do think there is a risk that we see demand bounce back strongly this auction.
6-month T-Bills yields stable on the open market – trading at 2.98%
On the open market – 6-month T-Bills trade at 2.98%, which is actually lower than the auction cut-off yield.
That being said – trading liquidity on the T-Bills is so thin that actually the market pricing is not that useful.
So I would caution against placing too much reliance on market pricing on T-Bills.
No big change in rate cut expectations for 2025
On interest rate cuts – no big change in market pricing of late.
Market is still pricing in 2 rate cuts in 2025.
So I would not expect any big change in T-Bills yields arising from this.
T-Bills Supply is up at $7.3 billion ($7.2 billion at the previous auction)
The good news is that T-Bills supply is going up to $7.3 billion.
You can see how this is the highest T-Bills auction amount since 2023, which is good news for investors (if you want higher yields).
Estimated yield of 3.00% – 3.10% on the 6-month T-Bills auction?
Putting everything together.
I actually think there is a good chance that T-Bills yields stay above 3.00%, and may even go higher than 3.04%.
I’m probably going with an estimated yield of 3.00% – 3.10% for the next 6-month T-Bills auction.
The wildcard of course is demand.
If demand recovers strongly because everyone sees that T-Bills yields are so much more attractive than Fixed Deposit.
And submits low-ball competitive bids.
Then well, all bets are off.
What are the alternatives to T-Bills in this market? Fixed Deposit, Money Market Funds, Bonds?
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Comparing interest rates for T-Bills vs Fixed Deposits vs Syfe Cash+ Guaranteed across all tenures (Feb 2025)
For the record – I’ve compared the latest T-Bills auction yields against other options in the market today.
You can see how the 6-month T-Bills are actually really attractive today.
So it does raise the question of whether that will lead to a surge of demand in the next auction.
| 3 months | 6 months | 12 months | Risk Free | |
| T-Bills yields | NA | 3.04% | 2.95% | Yes |
| Fixed Deposit (direct to bank) | 2.90% | 2.75% | 2.60% | Yes (if below $100,000 SDIC limit) |
| Syfe Cash+ Guaranteed (Institutional Fixed Deposit Rates) | 2.90% | 2.80% | 2.75% | No |
| Money Market Funds | ~3.0% | No | ||
Where would I put my cash today?
Whatever the case it – it’s fairly clear that T-Bills are a better choice than fixed deposits today, as you’re getting up to a 0.30% higher yield at some tenures.
T-Bills are completely risk free as well (backed by the Singapore government), the only issue is that the liquidity is tied up as you cannot get the cash back before maturity.
So if you asked me, that’s probably where I would be parking my spare cash going forward.
If you wanted a bit more liquidity, you can check out some of the options below:
UOB One, DBS Multiplier, OCBC 360
This one is self-explanatory, so I won’t dwell on it.
A high yield savings account like UOB One pays 4.0% blended yield on $150,000, that is fully liquid and can be withdrawn any time.
If it works for you, high yield savings accounts like these are probably the best option.
If they don’t work (whether you can’t meet the requirements or don’t have enough spare cash), then just use the other options on this list.
Money market fund instruments (like MariInvest) or fintech plays (like Chocolate Finance/GXS/FD) on the short end
Alternatively there is MariInvest which is a money market fund that pays about 3.0% over the past 30 days for me.
It’s definitely come down because of the rate cuts, but for something that is pretty low risk and with good liquidity (first $10,000 can be withdrawn instantly, rest is T+1 liquidity), it’s a decent option in my view.
Alternatively, there’s stuff like Chocolate Finance that even after the drop in rates, will pay about 3.3% on the first $20,000 (fully liquid, but note not SDIC insured).
While GXS is paying 2.98% for 3 months:
There is some investor discretion required here as unlike T-Bills, not all the instruments above (eg. Chocolate Finance / money market funds) are risk free.
But generally speaking I think all of the above are decent enough alternatives to T-Bills and Fixed Deposits.
Singapore Savings Bonds
Alternatively there are the latest Singapore Savings Bonds which yield 2.76% for the first year.
Frankly this is not too bad and competitive with the latest 6 or 12 month Fixed Deposit rates.
So this is another option too, as they can be withdrawn any time (get your money back at the start of the next month).
For more duration – Bond Funds
For more duration, you can consider buying a bond fund.
But bond funds are quite a complex instrument, and not for everyone.
Because if interest rates go up, you can suffer capital losses.
And there is no way to hold to maturity as the bond fund will automatically reinvest proceeds, so the timing at which you sell matters too.
I wrote quite a few articles on this in the past, and do check them out for more information (see here or here).
Will I start buying T-Bills again?
Will the recent pickup in T-Bills yields.
And assuming T-Bills yields stay above 3.0%.
I think T-Bills are pretty much a no brainer vs fixed deposit.
The drawback is (and always has been) that you cannot get liquidity back on short notice.
Which is why you cannot park all of your cash in T-Bills, and you need to have some funds in other instruments like UOB One, Singapore Savings Bonds, and so on.
Personally with all the volatility in markets I’ve been adding to my risk exposure with the cash from my maturing T-Bills (see what I am buying on FH Premium).
So I may not apply T-Bills at this point in time, as I do want the liquidity.
Whatever spare cash, I’ll probably just park in a money market fund like MariInvest for the time being.
But that said – if I had cash I don’t mind locking up for 6 months, I think T-Bills are probably the best option I would consider at this point.
Deadline to apply for the T-Bills auction on 13 Feb (Thurs)
The next 6-month T-Bills auction is on 13 Feb (Thurs).
This means that the deadline to apply is:
- 9pm on 12 Feb (Wed) for cash applications (and CPF-OA applications via DBS or OCBC internet banking)
- 9pm on 11 Feb (Tues) for UOB CPF-OA applications
This post is written on 7 Feb 2025 and will not be updated going forward. My latest views on markets, my Stock watchlist and full Personal Portfolio, are shared on FH Premium.