Top 11 Frequently Asked Questions (FAQs) about T-Bills in Singapore

Since last year, you find everyone monitoring the Treasury Bills (T-Bills) monthly like clockwork. It’s the time of the month where many will park their cash on a short-term security to earn better returns than most banks would offer. More importantly, it’s hassle-free. No conditions or criteria to fulfil. After six months to a year, you redeem your investment for another venture. 

You can invest in various financial instruments like stocks, real estate, mutual funds, bonds, or even top up your CPF accounts, T-Bills are still a compelling option today. Naturally, when it comes to money matters, you should be more deliberate in your investment. We distilled the top 11 FAQs anyone should know before investing in T-Bills.

 

Got your eyes on T-Bills? Start like a pro with our other investment guides!  The Beginner’s Guide to Singapore Treasury Bills for Individual Investors 2024: What are T-bills and How to Apply Latest 6-Month T-bill Offers Cut-Off Yield of 3.40% The Best Investment Alternatives For T-bills in Singapore 2024

 

1. Are T-Bills risky?

Even though T-bills are one of the safest bets you can make, thanks to government backing and a fixed yield that gives you a steady income. Here’s something to note:

• Yield Risk: If yields go up, your current T-bills might not look so hot anymore—this is called yield risk. 
  • When market rates rise, new T-bills or other fixed-income investments will offer better returns. 
  • So, your fixed returns on existing T-bills won’t seem as attractive, making them less appealing to investors.
• Lower Returns and Market Value Fluctuations: T-bills generally offer lower returns than corporate bonds and some certificates of deposit. 
  • They are sold at a discount and yield returns at maturity instead of paying periodic interest.
  • If you decide to sell your T-bills before they mature, you could either gain or lose money based on the current market value.

Pros	Cons
Low minimum investment requirement (S$1,000)	Relatively low rate of returns
Can be bought and sold in the secondary market before maturity	Returns are only realised at maturity
The yield earned on SGS is tax exempted for individuals	Limits liquidity and cash flow
Good for diversifying portfolio/mitigating risks

 

2. What is competitive and non-competitive bidding?

When you opt for T-bills, you have two bidding options: 

• Competitive
• Non-competitive

Competitive Bidding	Non-Competitive Bidding
Invest only if the yield meets your specified minimum.	Invest without specifying a yield.
Specify desired yield.	Accept the yield determined by the auction.
Lower yields make your bid more competitive.	Receive priority allocation, up to 40% of the total issuance.
Often used by institutional or experienced investors.	Ideal for investors who are flexible on the yield.
Allocation depends on bid competitiveness.	If non-competitive bids exceed 40%, bonds are allocated pro-rata.

 

3. Can I use my CPF to buy T-Bills?

You can apply for T-bills at your CPF Investment Scheme (CPFIS) agent bank (DBS/POSB, OCBC, UOB) or via online banking for DBS, OCBC, or UOB customers. 

Banks will charge a one-time S$2.50 fee per transaction and a quarterly S$2 service fee (both fees exclude GST) per counter. Using your CPF Ordinary Account (OA) will incur a fee of S$7.09 (after GST).

Only CPF-OA can be used to buy T-Bills. You still have to meet the following requirements to invest a portion. After all, CPF is meant for your retirement:

1. T-bills need to have at least one year left until they mature.
2. You can’t invest more than 35% of your investible savings in T-bills and other non-guaranteed investments.
3. Your total investment in T-bills, other non-guaranteed investments, and gold can’t exceed 10% of your investible savings.

ALSO READ: Best Fixed Deposit Rates in Singapore (Jul 2024)—Rates Up To 3.7%, Minimum Deposits From $500

 

4. Can non-residents buy T-Bills in Singapore?

Absolutely, non-residents can buy T-bills in Singapore. There’s a catch though. You need a Central Depository (CDP) account. Here’s how you can set it up:

1. Prep Your Docs: Gather your passport, proof of address, and any other documents required by the CDP.
2. Fill Out the Form: Download the CDP account application form from their website or pick one up from a participating financial institution.
3. Submit Your Application: Send in your completed form and documents to the CDP or through a financial institution.
4. Meet The Additional Requirements: Depending on the financial institution and the Monetary Authority of Singapore (MAS) rules, you might need to provide a minimum deposit or fulfil other compliance requirements.
5. Wait for the Green Light: The CDP will review your application and let you know if you’re approved. The process can take a few days to a couple of weeks.

Once your CDP account is approved, you can start buying T-bills.

 

5. When will the funds be debited?

When you apply for T-bills with cash, the funds will be debited immediately upon application. The discount on the face value of your T-bills will be credited back to your account within 1-3 business days after the auction date.

• For SRS applications, the funds will be set aside when you apply and then deducted 1-3 business days after the auction date.
• For CPFIS applications, the funds will be debited within the same 1-3 business days after the auction date.

Heads-up: Check with your bank about any transaction charges that might apply when using different funds for your application.

 

6. Can I be rejected?

There are a few possible reasons why your application didn’t go through. Here are some common reasons:

• You can’t use joint CDP accounts to buy T-bills. You’ll need an individual CDP Securities account to hold your T-bills.
• You might have entered an invalid or incorrect CDP account number during the application.
• Your CDP account might not have the Direct Crediting Service activated.

Keep in mind there’s an allotment limit of S$1 million per person per T-bills auction for non-competitive applications. Should you require more understanding, it’s best to check with your respective bank.

 

7. How do I read the T-Bills results?

In a uniform-price auction, both non-competitive and competitive bids for T-bills get the same Cut-off Yield and Cut-off Price. The Cut-off Yield is the highest yield accepted for successful competitive bids, and the Cut-off Price aligns with this yield.

• If you went for a non-competitive bid, check the % of Non-Competitive Applications Allotted to see the percentage allocated to non-competitive bids for that auction.
• If you made a competitive bid at the Cut-off Yield, the % of Competitive Applications at Cut-off Allotted shows the percentage given to those who bid exactly at the cut-off yield.

Heads up: If there’s an over-subscription, individual allotments may be adjusted randomly to maintain denominations of S$1,000.

For more insights into competitive bidding, you can refer to the Median Yield and Average Yield:

• Median Yield: The middle yield of all successful competitive bids.
• Average Yield: The weighted average yield of all successful competitive bids. This is calculated by summing the product of each successful bid’s amount and its yield, then dividing by the total amount of successful bids.

The Median Yield can vary for each auction. It might be 3.2% in one auction and 2.8% in another. This variation occurs because the results for each T-bill issue depend on the demand from potential bidders.

ALSO READ: Is Investing in T-bills Worth It in 2024?

 

8. How do I check the application status?

For individual investors, if your T-bills application was successful, your T-bills holding will be reflected in your respective accounts after the issuance date.

• For cash applications: Check your CDP notification statement after 6pm on the issuance date. 
  • If you opted for paper statements, they’ll be mailed from the 4th business day of each month. 
  • Every 10 units on the CDP statement represent S$1,000 in face value of your T-bills holdings. 
• For SRS applications: Check the statements from your SRS Operator (DBS/POSB, OCBC, and UOB).
• For CPFIS-OA applications: Look at the CPFIS statement sent by your agent bank (DBS/POSB, OCBC, and UOB).
• For CPFIS-SA applications: Check your CPF statement on the CPF portal.

 

10. How to withdraw prematurely?

No, you can’t cash out your T-bills before they mature. 

Don’t worry, you can always sell them on the secondary market through DBS, OCBC, or UOB. Just visit one of the branches and let them know your intent to sell and how you purchased your T-bills (cash, SRS, or CPFIS funds). 

Keep in mind that secondary market prices can fluctuate based on market conditions, so you might end up selling for more or less than what you originally paid.

 

11. How are T-Bills taxed?

Good news! There’s no tax on capital gains, so you can keep all your earnings. 

• For Singapore citizens, the yield earned is tax-exempt. 
• For non-residents in Singapore, you won’t be taxed on your yield earned.

 

Final Words

Whether it’s the bidding options, optimising with your cash or CPF funds, we hope you’re better equipped and more confident to make informed investment decisions. Ultimately, always align your investments with your goals and a comfortable risk tolerance. This will help to determine if T-Bills are a suitable addition to your portfolio and how you can leverage them effectively.

 

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