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short_term_t_bills

What are T-Bills?​

  • Treasury Bills - Short-term government debt securities
  • Issued by MAS on behalf of Singapore Government
  • Zero-coupon bonds - bought at discount, mature at face value
  • Profit = Face value - Purchase price

Key Features​

  • Tenures: 6 months or 1 year only
  • Minimum: S$1,000 (in S$1,000 multiples)
  • Maximum: No limit (subject to auction allocation)
  • Risk: Virtually zero (government-backed)
  • Tax: Returns are tax-free for individuals
  • Liquidity: Must hold to maturity (no early redemption)

How T-Bills Work​

  • Auction-based pricing - yields determined by market demand
  • Discount purchase: Buy below face value (e.g., pay S$980 for S$1,000 bill)
  • Maturity payout: Receive full face value at maturity
  • Return calculation: (Face Value - Purchase Price) / Purchase Price × (365/days to maturity)

Bidding Types​

Non-Competitive Bid:

  • Accept whatever yield the auction determines
  • Higher chance of getting allocation
  • Good for retail investors

Competitive Bid:

  • Specify your desired yield
  • Only get allocation if your bid is at/below cut-off yield
  • Risk of no allocation if bid too low

Purchase Options​

  • Cash: Via bank ATM/internet banking (DBS/POSB, OCBC, UOB)
  • SRS: Through SRS operator's internet banking
  • CPF-OA: In-person application at bank's main branch

Pros & Cons​

✅ Pros:

  • Government guarantee (zero default risk)
  • Tax-free returns
  • Market-determined competitive yields
  • Short commitment period

❌ Cons:

  • No liquidity - must hold to maturity
  • Auction risk - may not get allocation
  • Opportunity cost - locked in for 6-12 months
  • Secondary market - low liquidity, price fluctuation risk

Current Context (2024-2025)​

  • Yields typically range 3-4% depending on market conditions
  • Higher yields than SSBs for similar timeframes
  • Popular during rising interest rate environments

Strategy Considerations​

  • Cash parking: Good for short-term excess cash (6-12 months)
  • Laddering: Stagger maturities for regular cash flow
  • Rate timing: Consider interest rate cycle when choosing tenure
  • Emergency fund: Not suitable due to lack of liquidity

References