Fixed deposit at 3.31%?

by

This inflation does not seem to be going away. The Fed has made it clear that interest rates will rise till rising prices are under control. Global stocks and bonds are in bear market, with US recession at 98% probability (https://www.straitstimes.com/business/companies-markets/sell-off-on-wall-street-deepens-on-98-recession-odds) So what do I invest with my spare cash? Recently I invested in a “fixed deposit” at 3.31% annualized, half year maturity. Well, not exactly.

Singapore Treasury Bills (T-bills) are SGD bonds that is issued by the Government of Singapore (AAA rating) that has the following features:

  • tenor < 1 year.
    • 6 months
    • 1 year
  • no coupon. It is issued at discount to the principal.
  • minimum is $1000
  • cash, SRS, CPF
  • can sell in secondary market at profit or loss. However, as maturity is less than 1 year, it does not make sense to sell, which will incur commission and bid spread.

Investing in Singapore T-bills is preferred over Singapore Saving Bonds (SSB) and Singapore Government Securities (SGS) bonds when one has the view that interest rates will continue to rise in the short term. This is my assumption when I recently invested in BS22119T 6-month T-bill on 28 Sep using SRS.

BS22119T 6-month T-bill

  • Tenor is 182 days. Maturity is 4 Apr 2023
  • Annualized interest is 3.31%.
  • half year interest is 1.655%
  • For each, $10,000 that i want to receive on maturity date, I paid  $9834.50
  • Cost of application is $2.
  • Custodized with CDP if you use cash. I use UOB SRS investment bank, there will be a $2 monthly custody fee per counter.

I used UOB internet banking portal to apply. Retail investors can also use OCBC or UOB.

I did not know the bond’s annualized interest, until after the auction date 29 Sep 2022. I used the previous auction held on 15 Sep as reference, which coincidentally, is also 3.31%

So I chosed “non-competitive bid”. This means that I wanted this T-bill regardless of the returns. All I need is to specify the amount that I want to invest. As this is my first T-bill, I really wanted it and did not want to lose out in the auction. Choosing “non-competitive” gives me a slight advantage. I will be allocated first, ahead of those who submitted “competitive” bid.

If you wish to invest only if it yields above a certain level, choose “competitive” bid. Specify the minimum yield that you want to receive, up to 2 decimal places.

The next T-Bill Auction will be held on 6th Oct. On offer is a half-year and a one year T-Bills. Here is the MAS issuance calender. https://www.mas.gov.sg/bonds-and-bills/auctions-and-issuance-calendar. Still considering if it is worth the trouble investing my CPF in T-Bills.

  • I'm a remisier with Maybank Securities, and as a bonds and REITs investor myself, I guide my clients to build resilient bonds and REITs portfolios. If you like to be guided, please open a trading account to become my client; It's free!