Treasury Bills (T-Bills) represent a widely favoured short-term investment vehicle in Singapore, particularly among cautious investors seeking a secure and low-risk means of augmenting their savings. With the full backing of the Singapore Government, T-Bills provide stability and consistent returns, thus holding an allure for conservative investors.
Key features of T-Bills
Treasury Bills, commonly called T-Bills, are obtainable in two maturity periods: 6 months and one year. Unlike traditional bonds that make periodic interest payments, T-Bills are initially sold at a price lower than their face value and then redeemed at face value upon reaching maturity.
The variance between the purchase price and the face value constitutes the interest earned. For instance, a 6-month T-Bill issued in August 2024 offered a cut-off yield of 3.34% per annum.
Investment requirements and process
To participate in T-Bill investments, a minimum principal amount of S$1,000 is required, with subsequent investments to be made in increments of S$1,000. Investors can acquire T-Bills using cash, Supplementary Retirement Scheme (SRS) funds, or Central Provident Fund Investment Scheme (CPFIS) funds.
T-Bills can be acquired through DBS, UOB, or OCBC bank platforms via online banking or in person at CPFIS agent bank branches.
When participating in T-Bills auctions, investors have the option to submit either competitive or non-competitive bids. In a competitive bid, an investor specifies the yield they are willing to accept. In contrast, in a non-competitive bid, the investor only specifies the amount to be invested without regard to the yield.
Non-competitive bids are typically prioritized, with up to 40% of the total issuance allotted.
Benefits and considerations
Treasury Bills (T-Bills) present an opportunity for risk-free returns as they are guaranteed by the Singapore Government, thus offering a secure investment avenue. Furthermore, the interest income derived from T-Bills is exempt from tax for individual investors, presenting an added financial advantage.
Although T-Bills are not redeemable before maturity, their short tenors of 6 months or one year render them relatively liquid investments.
Comparison with other investment options
Compared to Singapore Savings Bonds (SSBs), T-Bills exhibit variances in their maturity periods, redemption options, and interest payment methods. SSBs feature step-up interest rates and allow flexible redemption, while T-Bills necessitate holding until maturity.
Moreover, T-Bills offer analogous or marginally lower returns compared to fixed deposits. However, they boast lower minimum investment requirements and shorter lock-in durations.
