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Is it price investing in Singapore Treasury Payments (T-Payments) in 2022?

So it looks as if everybody round you has been speaking about SGS Bonds and T-bills these days. What are they, and must you comply with the gang who’ve invested their financial savings into it? Right here’s what you’ll want to know earlier than you make any transfer.

With the most recent MAS T-bills cut-off yield at 3.32% p.a., Singapore’s monetary scene has been buzzing with speak of it, even amongst non-investors and folk who’ve by no means purchased bonds earlier than.

And with charges this excessive, it’s no shock that just about everybody appears to be excited over the most recent T-Payments, the place yields have gone up from 0.61% in January to three.32% p.a. for the most recent auctions in September.

Screenshot from a public sharing. Picture credit: Siew Mun Kwan.
Supply: MAS 15 Sept issuance
Supply: MAS 29 Sept issuance

At these charges, even essentially the most aggressive fastened deposit seem like a weaker providing in distinction, particularly with an extended lock-up interval too. As an example, the very best charge now could be 2.8% p.a. supplied by RHB Financial institution for a minimal $20k placement for twenty-four months, whereas Hong Leong is providing 2.75% p.a. on a deposit of at the very least $50k for a 12 months.

And as it’s, the native fastened deposits are already at their highest for the reason that finish of the Asian monetary disaster nearly 24 years in the past.

What are Treasury Payments and Is It Price Investing In?

Singapore’s Treasury Payments (T-bills for brief) are short-term authorities securities issued at a reduction to their face worth, within the type of 6-month and 1-year T-bills. As an investor, you obtain the total face worth at maturity, which suggests your yield may be calculated because the distinction between your bid value and the maturity value.

Screenshot from MAS web site
Simplified Explainer:
When you efficiently bid for and secured a 6-month T-bill on the charge of three.32%, your $100k capital would now grow to be $10k + $1,660 after 6 months. When you managed to safe a 1-year T-bill on the identical charges, you'll have successfully “earned” $3,320.

In actuality, what would have occurred is that you'd have paid $96.68 for the bond and gotten $100 upon maturity i.e. you'll have paid $96,680 and acquired $100,000 after 6 months / 1 12 months, which is the place your 3.32% yield comes from.

There hasn’t been a lot curiosity in T-bills previous to this 12 months and for good cause: the yields on our native T-bills have remained pretty flat all alongside (and for the final 3 years), however began rising steeply from the beginning of this 12 months (in step with the worldwide Fed’s rate of interest hikes):

Supply: MAS T-bills Historic Chart
My Take: If T-bill yields proceed rising and there’s no information about CPF rates of interest being revised increased, I could begin to use my CPF funds to purchase into some T-bills as soon as yields cross the prevailing CPF charges.

You may simply learn how to use for T-bills on-line, so I received’t cowl that on this article. Nonetheless, what are the dangers that include investing in T-bills?

Dangers of Investing in T-Payments

Now, when you intend to purchase and maintain T-bills till maturity, then your danger is sort of none – since these T-bills are absolutely backed by the Singapore authorities and are to be held for under 6-months or 1-year at most. Except you assume the Singapore authorities goes to go bankrupt or bail on you inside this brief timeframe…a danger which I believe is sort of near zero.

Nonetheless, in case your private monetary circumstances modifications abruptly throughout this (brief) interval and also you immediately want the money (earlier than maturity), you’ll then must promote them within the secondary market.

This may be achieved by going to any of the native banks and getting a quote from them.

Persevering with on the above instance, think about you will have $96,680 locked up in a 1-year T-bill, however you can't wait till its maturity in 2 months time to get $100,000 since you want the cash urgently now. Your financial institution quotes your $98 (as a substitute of the $100 you had been hoping for) and you're taking it, since you’re determined. You now get $98,000 as a substitute of the $100,000 you had been anticipating, taking a $1,320 “revenue” as a substitute and letting your financial institution earn $2,000 since you needed to let it go sooner than anticipated.

T-bills vs. Singapore Authorities Securities (SGS)

At any charge, T-bills with their shorter maturity are a significantly better choice than SGS bonds, which have maturities starting from 2 – 50 years.

Final month’s 5-year SGS bond
September 2022’s 30-year SGS bond

And whilst you can technically promote your SGS bonds on the secondary market i.e. SGX by your self (no must undergo your financial institution), the market is extraordinarily illiquid i.e. it’s tougher to seek out consumers than you assume.

SGS bonds on the SGX secondary market

T-bills vs. Singapore Financial savings Bonds

Another choice could be to contemplate Singapore Financial savings Bonds (SSBs), that are equally backed by the Singapore authorities however provide extra flexibility i.e. you possibly can redeem your SSB items at any time.

Supply: Singapore Financial savings Bonds

Hardworking of us can strive their arms at constructing a SSB ladder i.e. replicating what this different low-risk investor, Siew Mun, has achieved:

Supply: Seedly Fb Group, authored by Siew Mun Kwan

I began speaking about SSBs after they had been first launched in October 2015, however as charges had been low then (<1% for the primary 1-2 years), there was little incentive to essentially construct a SSB ladder again then because it felt like an excessive amount of work for too little features.

At present, with charges beginning at 2.6% for the primary 12 months of SSBs, low-risk buyers preferring to go for protected investments (i.e. no danger of capital loss) can take into account this.

Nonetheless, even holding SSBs for 10 years (presently 2.99%) might not be sufficient to beat inflation. Therefore, you might wish to diversify into different monetary instruments as a substitute.

Whereas T-bills are undoubtedly enticing at this cut-off date, the yields are continuously altering and you need to bid at every public sale i.e. there’s no assure that you’re going to get it.

When you do, hooray!

And when you tried however haven’t been profitable at your prior auctions, one other funding device you possibly can take into account are money administration funds – (often known as Cash Market Funds (MMFs) – as a substitute.

No, they’re not backed up by the Singapore authorities, however they typically provide a increased return than fastened deposits whereas providing you with the pliability to redeem your cash anytime with no penalty.

One of the enticing money administration funds accessible to Singaporeans is the Fullerton SGD Money Fund, which is the most important home money fund right here and with a confirmed observe document of getting constantly overwhelmed its benchmark since its inception in 2009. Regardless of the chance of value volatility, the fund has by no means had a damaging month-to-month return all through its total working historical past.

Supply: Fullerton SGD Money Fund Report

How has it fared all through 2022 – the 12 months when development shares crashed and of Fed charge hikes? It held up effectively, as you possibly can see:

Snapshot of the fund’s historic returns, from the moomoo app.

Why was this so? The reply may be present in its holdings, because the Fullerton SGD Money Fund primarily invests in short-term Singapore-dollar deposits with respected monetary establishments. For many who perceive rankings, you’ll be happy to notice that these are solely devices with a minimal score of F-2 by Fitch, P-2 by Moody’s or A-2 by Commonplace and Poor’s.

Snapshot of the fund’s most important holdings, from the moomoo app

Sadly, retail buyers can not purchase this fund straight – however moomoo has modified this by providing of us such as you and me a straightforward option to spend money on the Fullerton SGD Money Fund – by way of its moomoo Money Plus.

And when you’re on the lookout for a USD-based money administration fund as a substitute, try if the CSOP USD MMF would suit your wants higher.

moomoo Money Plus affords 2 sorts of money administration funds, accessible on its app

Who’s appropriate for T-bills vs. Money Administration Funds?

There are a couple of fundamental teams of people that could be appropriate for such devices, and I’ve categorized it under:


  • Newcomers who don’t know the best way to make investments, and are dissatisfied with their present financial savings returns
  • Conservative of us who need a protected funding / almost-zero danger choices
  • Buyers who need one thing backed by the Singapore authorities
  • Buyers who don’t want the money within the subsequent 6 – 12 months

Money Administration Funds

  • Newcomers who don’t know the best way to make investments, and are dissatisfied with their present financial savings returns
  • People who need low-risk choices, and with out the excessive volatility of equities or foreign exchange
  • Buyers who wish to reserve the choice of withdrawing their money at any time with zero penalties
  • Seasoned buyers who’re on the lookout for a versatile place to quickly maintain their warchest money, whereas ready for alternatives within the inventory market to seem

To search out out extra about money administration funds like moomoo Money Plus, try this text right here, the place I dive right into a extra detailed assessment of how they work and what you’ll want to know.

And when you’ve all the time been somebody with spare money who solely checked out fastened deposits, try T-bills and/or money administration funds as a substitute – you may simply discover that they’re a greater, extra rewarding choice for you.

Vital word: Money administration funds like moomoo Money Plus are NOT the identical as T-bills, and their core variations have been outlined on this article. Every instrument has its professionals and cons, and it’s your duty to do your personal due diligence additional earlier than deciding what to do along with your cash.

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Disclosure: This publish is dropped at you along side moomoo SG. All views expressed on this article are my very own unbiased opinions. Neither moomoo Singapore or its associates shall be responsible for the content material of the knowledge offered.

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This commercial has not been reviewed by the Financial Authority of Singapore.



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