One of the simplest ways to keep your excess savings is to leave it in your bank savings account. But that may not give you sufficient returns to beat inflation over the long term, especially as some savings accounts may only give as low as 0.05% per annum (p.a.) interest.
On the other hand, savings accounts with higher interest rates, such as multiplier savings accounts, may not only give you less interest as you save more, but they may also make you jump through more hoops to get the higher interest rates.
One option to earn a higher return on your excess money is to invest in the Treasury Bills issued by the Singapore Government. These debt instruments allow you to earn a higher return that is based on the current market environment.
Here’s what you need to know about Treasury bills (T-bills) and how you can buy them in Singapore.
Read Also: Best Savings Accounts In Singapore – If You Don’t Want To Keep Jumping Through Hoops
Treasury Bills (T-Bills) Are One Of The Four Types Of Singapore Government Securities (SGS)
The debt securities that are issued by the Singapore government are collectively known as Singapore Government Securities (SGS). These SGS are considered safe investments as they are fully backed by the Singapore government, which has the strongest credit rating accorded by international credit rating agencies, signifying the lower risk of default.
| Rating Agency | Local Currency | Foreign Currency |
| Moody’s | Aaa | Aaa |
| S&P | AAA | AAA |
| Fitch | AAA | AAA |
| R&I | AAA | AAA |
Source: MAS
There are four types of SGS: Treasury bills (T-bills), SGS bonds, Singapore Savings Bonds (SSB), and Cash Management Treasury Bills (CMTBs).
Treasury bills (T-bills) are short-term bills that are offered in either a 6-month or 1-year tenor. They are also called “zero coupon bonds” because they don’t pay interest during the life of the bond. Instead, they are sold at a discount to their face value, which the investor will get back at full value upon maturity.
For example, if you applied successfully for $1,000 worth of 1-year T-bills at 2% interest per annum, you would only need to pay around $980. When the bond matures, you will receive the full lump sum of $1,000, which includes the $20 interest.
Read Also: [2022 Edition] Complete Guide To Buying Singapore Savings Bonds (SSB)
Treasury Bills (T-Bills) Are Issued To Develop Singapore’s Debt Markets
The Treasury bills and SGS bonds (Market Development) are issued by the government primarily to develop the local debt markets. The issuance of these bonds serves three main reasons.
The first is to build a liquid SGS market to provide a robust government yield curve to serve as a benchmark for the pricing of private debt securities.
Second, is to foster the growth of an active secondary market for both cash transactions and derivatives to enable efficient risk management.
And the third reason is to get both domestic and foreign issuers and investors to participate in the Singapore bond market.
Features of T-Bills
Treasury bills (T-Bills) have their own unique features, and here’s what you need to know.
The T-Bills can be bought by both institutions and individuals, including non-residents, over the age of 18 years old.
The minimum investment amount in T-bills is $1,000, with subsequent increments of $1,000. There is no maximum amount that an individual can hold, but there are limits—up to $1 million in non-competitive bids—for each auction.
The T-bills are sold on a uniform price auction method, which requires settlement within T+3 days.
T-Bills And SGS Bonds Are Sold Under A Uniform Price Auction Method
As opposed to the Singapore Savings Bond (SSB), which is based on a “quantity ceiling” format, the SGS and T-bills are issued via a uniformed-price auction. Successful bids or applications will be given out at the uniformed yield, which is the highest accepted yield (or cut-off yield) of successful competitive bids submitted at the auction.
When applying for T-Bills or SGS bonds, investors will be required to choose between making a competitive or non-competitive bid.
Competitive Bid Vs Non-Competitive Bid
A competitive bid is one that requires you to specify the price (to be expressed in terms of percentage yield, up to two decimal places) that you are willing to pay for the SGS bonds or T-bills. A lower yield represents a more competitive bid.
A non-competitive bid is one in which you do not need to specify a price and instead will be allotted the SGS bonds or T-bills at a uniform yield based on the results of the competitive tenders. This could be a better choice for retail investors, who might not know enough to put in a competitive bid.
Additionally, all non-competitive bids will be satisfied first, before the balance is then awarded to those who have submitted competitive bids. You stand a higher chance of securing your allotment with a non-competitive bid.
Read Also: How Is The Interest Rate Derived For The Singapore Savings Bonds (SSB) And Why It Is Increasing?
6-Month and 1-Year Treasury Bill Rates Historically
Here’s a look at the past historical rates for the 6-month T-bills from September 2019 to September 2022. The short-term interest rates began rising in 2022 as the Federal Reserve of the United States started raising its interest rates.
Here’s a look at the past historical rates for the 1-year T-bills from September 2019 to September 2022. The 1-year rates follow a similar trajectory as the 6-month interest rates.
The next issuance of the T-bills will be on:
ISIN Code: SGXZ52032836
Announcement Date: 3 Nov 2022
Auction Date: 10 November 2022
Issue Date: 15 November 2022
Tenor: 6 Months
ISIN Code: SGXZ30631881
Announcement Date: 17 Nov 2022
Auction Date: 24 November 2022
Issue Date: 29 November 2022
Tenor: 6 Months
Should You Invest In T-Bills?
Given that individual investors can buy different kinds of bonds, here are some factors to think about if you want to add T-bills to your portfolio.
T-bills are a safe, short-term investment option that can be used for diversification of your investment portfolio. It allows you to receive a fixed interest payment at maturity.
Nevertheless, investments in T-bills or bonds generally might not generate sufficient returns to beat inflation in the long term. Therefore, the T-bills should be considered in totality with your other assets rather than being the only choice of investment.
Additionally, as the interest rates are determined based on a uniform-price auction, there is no certainty as to the interest rate that you will receive when you apply for T-bills. In the worst-case scenario, you may have to accept negative interest-bearing T-bills.
Lastly, selling the T-bills before maturity may result in losses as the bond prices may fluctuate depending on the market interest rate environment.
Read Also: 6 Investments In Singapore That Provide Guaranteed Principal And Returns
How To Buy T-Bills In Singapore
The 6-month T-bills are issued every two weeks, while the 1-year T-bills are issued every three months. Check out the Auctions and Issuance Calendar for details on the latest T-bill issuances.
You can buy the T-bills using cash, supplementary retirement scheme (SRS) funds, or CPFIS Investment scheme funds. Here’s the process using the three methods.
Read Also: Step-By-Step Guide To Opening Your CPF Investment Account (CPFIA)
Cash Applications
To buy T-bills using cash, you need a bank account with one of the three local banks (DBS/POSB, OCBC, and UOB). You will also need an individual Central Depository (CDP) account with direct crediting services activated. This is to allow your coupon and principal payments to be credited directly to your bank account.
Once prepared, you can apply for the T-bills through the local banks’ ATMs and internet banking portals.
If successful, the transaction would be reflected on your CDP statement.
Read Also: Step-By-Step Guide To Opening A CDP Account In Singapore
SRS Applications
To buy T-bills using SRS, you need an SRS account with one of the three SRS operators (DBS/POSB, OCBC, and UOB). After that, you can apply for T-bills through your SRS operator’s online banking portal.
If successful, the transaction would be reflected in the statements issued by your SRS operator.
Read Also: Step By Step Guide To Opening Your Supplementary Retirement Scheme (SRS) Account
CPFIS Applications
To buy T-bills using CPFIS-OA investments, you would need a CPF Investment Account with one of the three CPFIS agent banks (DBS/POSB, OCBC, and UOB). Unlike the above options, you would need to submit an application in person at any branch of the CPFIS bond dealers (DBS/POSB, OCBC, and UOB) when buying using your for CPFIS-OA account.
If successful, the transaction would be reflected on your CPFIS statement sent by your agent bank.
Read Also: 7 Types Of Investments You Can Make Using Your CPF OA Monies Via The CPFIS-OA
How To Sell T-Bills In Singapore
If you need to sell your T-bills before the maturity date, you can do so with any of the three local banks by visiting their main branches.
However, do note that, depending on the market conditions, the price of the SGS T-bills might be higher or lower than what you paid.
Read Also: 4 Investments That Naturally Hedges Against Inflation In Singapore
This article was first published on21 September 2022and has been updated with the latest information on the Treasury Bills (T-bills).
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FAQs
How do you buy Treasury bills? ›
You can buy T-bills online directly from the U.S. government at TreasuryDirect. Alternatively, you can also buy T-bills through a bank or broker. Bills are issued weekly through an auction bidding process.
What do T-bills do? ›When an investor buys a Treasury Bill, they are lending money to the government. The US Government uses the money to fund its debt and pay ongoing expenses such as salaries and military equipment. T-Bills are sold in denominations ranging from $1,000 (standard) up to a maximum of $5 million.
Why would you buy a T Bill? ›T-Bills Are a Safe Investment
Treasury securities are backed by the full faith and credit of the U.S. government. Investment professionals use Treasury yields as the risk-free rate or the rate of return offered by an investment that carries no risk.
T-Bills - These have the shortest range of maturities of all government bonds at 4, 13, 26 and 52 weeks.
How much in T-bills can I buy? ›The limit for noncompetitive purchases is $10 million for each security type and term, for each auction. This limit applies regardless of whether you're buying a bill, note, bond, Floating Rate Note, or TIPS, and regardless of what method you use to make the purchase (TreasuryDirect, broker, or dealer).
How much do I need to buy a Treasury bill? ›You will have to complete a Treasury Bills Application from. A minimum amount of GH 100.00.
What is T-bills in simple words? ›Treasury bills are money market instruments issued by the Government of India as a promissory note with guaranteed repayment at a later date. Funds collected through such tools are typically used to meet short term requirements of the government, hence, to reduce the overall fiscal deficit of a country.
How do I buy Treasury bonds directly? ›Treasury bonds can be bought directly from the government's TreasuryDirect.gov website or through a brokerage or bank. Treasury bonds are prized by income-seeking investors because they are low-risk and highly liquid; however, they don't pay the highest interest rates.
How often do T-bills pay interest? ›We sell Treasury Notes for a term of 2, 3, 5, 7, or 10 years. Notes pay a fixed rate of interest every six months until they mature.
Who can buy T-bills? ›Treasury bills were first issued in India in 1917. They are issued via auctions conducted by the Reserve Bank of India (RBI) at regular intervals. Individuals, trusts, institutions and banks can purchase T-Bills. But they are usually held by financial institutions.
Is buying T-bills a good idea? ›
T-bills are one of the safest investments, but their returns are low compared to most other investments. When deciding if T-bills are a good fit for a retirement portfolio, opportunity cost and risk need to be considered. In general, T-bills may be appropriate for investors who are nearing or in retirement.
Is buying T-bills a good investment? ›Overall, T-bill yields are likely to respond faster to rate increases by the Federal Reserve compared to online savings accounts or CDs. Notably, the yield on a one-year T-bill is higher than the yield on a 10-year Treasury note, which is 3.9%.
Who are issued treasury bills? ›1.3 Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenors, namely, 91 day, 182 day and 364 day. Treasury bills are zero coupon securities and pay no interest.
Do T-bills pay semi annually? ›Treasury bonds are government securities that have a 20-year or 30-year term, and they pay a fixed interest rate on a semi-annual basis. They earn interest until maturity and the owner is also paid a par amount, or the principal, when the Treasury bond matures.
Which of the following statements about T-bills is true? ›T-Bills are a direct obligation of the U.S. Government. Which of the following are TRUE statements regarding Treasury Bills? The best answer is B. T-Bills are registered in the owner's name in book entry form only; no bearer securities can currently be issued in the U.S. to individual residents.
Where can I buy Treasury notes? ›TreasuryDirect.gov is the one and only place to electronically buy and redeem U.S. Savings Bonds. We also offer electronic sales and auctions of other U.S.-backed investments to the general public, financial professionals, and state and local governments.
How much do 1 year Treasury bills pay? ›1 Year Treasury Rate is at 4.59%, compared to 4.75% the previous market day and 0.17% last year. This is higher than the long term average of 2.86%.
What happens when you buy a Treasury? ›A Treasury bond, or "T-bond," is debt issued by the U.S. government to raise money. When you buy a T-bond, you lend the federal government money, and it pays you a stated rate of interest until the loan comes due.
How much money do you need to buy a Treasury bond? ›You can buy an electronic savings bond for any amount from $25 to $10,000 to the penny. For example, you could buy an electronic savings bond for $75.38.
What is an example of a treasury bill? ›Treasury bills (or T-bills)
T-bills are sold at a discount from the par amount, or face value, of the bill. Investors receive the full face value amount at maturity. For example, an investor could buy a T-bill for $950, but receive a face value of $1,000 at maturity.
What is Treasury bill and its benefits? ›
Treasury bills are government-issued security. These securities come with zero interest. The profit you earn is based on the difference between the face value of the security and the discounted price of the security. T-bills have a lower maturity period than other investment options.
What is the best way to buy bonds? ›Investors can buy individual bonds through a broker or directly from an issuing government entity. One of the most popular cases for buying individual bonds is the ability for investors to lock in a specific yield for a set period of time.
When can you buy Treasury bonds? ›If an investor wants a steady income stream, a Treasury bond might be a good choice. However, if interest rates are rising, purchasing a bond may not be a good choice since the fixed rate of interest might underperform the market in the future.
What is the easiest way to buy bonds? ›Many brokers now give access to investors to purchase individual bonds online, although it may be easier to purchase a mutual fund or ETF that specializes in bonds. Government bonds can be purchased directly through government-sponsored websites without the need for a broker.
Are T-Bills Safe? ›T-bills are considered a safe and conservative investment since the U.S. government backs them. T-Bills are normally held until the maturity date. However, some holders may wish to cash out before maturity and realize the short-term interest gains by reselling the investment in the secondary market.
How do T-Bills pay out? ›For example, a bill may be worth $10,000, but you would buy it for $9,600. Every bill has a specified maturity date, which is when you receive money back. The government then pays you the full price of the bill -- in this case $10,000 -- and you earn $400 from your investment.
Are T-bills tax free? ›Interest income from Treasury bills, notes and bonds - This interest is subject to federal income tax, but is exempt from all state and local income taxes.
Can common people buy T-bills? ›Gupta said that retail investors in India can buy T-bills by opening up a 'Retail Direct Scheme Account' with the Reserve Bank of India (RBI). Apart from this, retail investors can also buy T-bills from the stock exchange and other primary and secondary markets.
Can you make money buying T-bills? ›Like other debt instruments issued by the U.S. Treasury, T-bills are considered a safe-haven investment, known for producing reliable returns even in times of economic declines.
Are T-bills risk free? ›Most often, either the current Treasury bill, or T-bill, rate or long-term government bond yield are used as the risk-free rate. T-bills are considered nearly free of default risk because they are fully backed by the U.S. government.
Is Treasury bill a debt? ›
Treasury bill is a short-term debt instrument issued with maturities of 91 Days, 182 Days and 364 Days by the Government of Sri Lanka under the Local Treasury Bill Ordinance No.
How many Treasury bills are there? ›Treasury Bills
They are thus useful in managing short-term liquidity. At present, the Government of India issues four types of treasury bills, namely, 14-day, 91-day, 182-day and 364-day.
| This Week | Month Ago | |
|---|---|---|
| Ten-Year Treasury Constant Maturity | 4.14 | 4.01 |
| 182-day T-bill auction avg disc rate | 4.49 | 4.25 |
| One-Year MTA | 2.049 | 1.689 |
| Two-Year Treasury Constant Maturity | 4.67 | 4.43 |
Buying through a bank, broker, or dealer
Individuals, organizations, fiduciaries, and corporate investors may buy Treasury securities through a bank, broker, or dealer.
You can sell a T-Bill before its maturity date without penalty, although you will be charged a commission. (With CDs, you pay a sizeable penalty for early withdrawals.)
Which is better Treasury bills or bonds? ›If the money will be needed in the short term, a Treasury bill with its shorter maturity might be best. For investors with a longer time horizon, Treasury bonds with maturities up to ten years might be better.
Which of the following statements is most accurate regarding Treasury bills? ›Treasury bills are original issue discount obligations that mature at par, in minimum denominations of $100 each. Which of the following are TRUE statements regarding Treasury Bills? The best answer is B. T-Bills are original issue discount obligations that mature at par.
Which of the following are characteristics of Treasury bills? ›Which of the following are characteristics of Treasury Bills? Notes: Treasury bills, or T-bills, are short-term debt instruments issued by the U.S Treasury. T-bills are issued for a term of one year of less. Treasury bills are sold with maturities of four, thirteen, twenty-six and fifty-two weeks.
What is the 6 month Treasury bill rate? ›6 Month Treasury Bill Rate is at 4.47%, compared to 4.48% the previous market day and 0.06% last year.
How much does a $1000 Treasury bill cost? ›T-bills are issued at a discount from the par value (also known as the face value) of the bill, meaning the purchase price is less than the face value of the bill. For example, a $1,000 bill might cost the investor $950 to buy the product.
How much is a 3 month treasury bill? ›
3 Month Treasury Bill Rate is at 4.11%, compared to 4.10% the previous market day and 0.04% last year.
What is the 1 year Treasury bill rate? ›| This Week | Month Ago | |
|---|---|---|
| One-Year Treasury Constant Maturity | 4.77 | 4.5 |
Government treasury bills can be procured by individuals at a discount to the face value of the security and are redeemed at their nominal value, thereby allowing investors to pocket the difference. For example, a 91-day treasury bill with a face value of Rs. 120 can be bought at a discounted price of Rs. 118.40.
How often do Treasury bills pay interest? ›We sell Treasury Notes for a term of 2, 3, 5, 7, or 10 years. Notes pay a fixed rate of interest every six months until they mature.
What is 6 month Treasury bill rate? ›6 Month Treasury Bill Rate is at 4.47%, compared to 4.48% the previous market day and 0.06% last year.
Are T-bills a good 2022 investment? ›Secondly, as per the U.S. Treasury website, the highest interest rate on a T-bill is around 3.13% (as of July 2022). That's higher than the average high-yield savings account yield right now, but it's significantly lower than the average annual return of the S&P 500.
Do Treasury bills pay interest monthly? ›Both bonds and notes pay interest every six months. The interest rate for a particular security is set at the auction. The price for a bond or a note may be the face value (also called par value) or may be more or less than the face value.
How long does a treasury bill last? ›We sell Treasury Bills (Bills) for terms ranging from four weeks to 52 weeks. Bills are sold at a discount or at par (face value). When the bill matures, you are paid its face value.
How do 3 month Treasury bills work? ›The 3-Month Treasury bill is a short-term U.S. government security with a constant maturity period of 3 months. The Federal Reserve calculates yields for "constant maturities" by interpolating points along a treasury curve comprised of actively traded issues of term (e.g., 1 month) maturities.
Where do you buy Treasury bonds? ›Treasury bonds, or Treasuries, are debt securities issued by the US government. Treasury bonds can be bought directly from the government's TreasuryDirect.gov website or through a brokerage or bank.
Does Treasury bill have interest? ›
Why invest in Treasury Bills? You get the interest in advance.
What is the average interest rate on T-bills? ›4 Week Treasury Bill Rate is at 3.48%, compared to 3.51% the previous market day and 0.04% last year. This is higher than the long term average of 1.17%.