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

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

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


So it looks like everybody round you has been speaking about SGS Bonds and T-bills recently. What are they, and do you have to comply with the group who’ve invested their financial savings into it? Right here’s what you could 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 discuss of it, even amongst non-investors and people 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 mounted deposit appear to be a weaker providing in distinction, particularly with an extended lock-up interval too. For example, the best price now could be 2.8% p.a. provided 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 mounted deposits are already at their highest because the finish of the Asian monetary disaster nearly 24 years in the past.

What are Treasury Payments and Is It Value 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 implies your yield might be calculated because the distinction between your bid value and the maturity value.

Screenshot from MAS web site
Simplified Explainer:
For those who efficiently bid for and secured a 6-month T-bill on the price of three.32%, your $100k capital would now change into $10k + $1,660 after 6 months. For those who 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 purpose: 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 keeping 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 the way to use for T-bills on-line, so I gained’t cowl that on this article. Nonetheless, what are the dangers that include investing in T-bills?

Dangers of Investing in T-Payments

Now, for those who intend to purchase and maintain T-bills till maturity, then your threat 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 suppose the Singapore authorities goes to go bankrupt or bail on you inside this brief time-frame…a threat which I believe is sort of near zero.

Nonetheless, in case your private monetary circumstances adjustments abruptly throughout this (brief) interval and also you out of the blue want the money (earlier than maturity), you’ll then need to promote them within the secondary market.

This may be finished 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 not 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 have been hoping for) and you are taking it, since you’re determined. You now get $98,000 as a substitute of the $100,000 you have 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 price, T-bills with their shorter maturity are a a lot better possibility 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 have to undergo your financial institution), the market is extraordinarily illiquid i.e. it’s tougher to search out patrons than you suppose.

SGS bonds on the SGX secondary market

T-bills vs. Singapore Financial savings Bonds

An alternative 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 models at any time.

Supply: Singapore Financial savings Bonds

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

Supply: Seedly Fb Group, authored by Siew Mun Kwan

I began speaking about SSBs once they have been first launched in October 2015, however as charges have 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 good points.

At this time, with charges beginning at 2.6% for the primary 12 months of SSBs, low-risk traders preferring to go for secure investments (i.e. no threat of capital loss) can contemplate this.

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

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

For those who do, hooray!

And for those who tried however haven’t been profitable at your prior auctions, one other funding instrument you possibly can contemplate are money administration funds – (also referred to 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 mounted deposits whereas providing you with the pliability to redeem your cash anytime with no penalty.

Probably the most engaging money administration funds accessible to Singaporeans is the Fullerton SGD Money Fund, which is the biggest home money fund right here and with a confirmed monitor document of getting persistently overwhelmed its benchmark since its inception in 2009. Regardless of the chance of value volatility, the fund has by no means had a unfavourable month-to-month return all through its complete working historical past.

Supply: Fullerton SGD Money Fund Report

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

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

Why was this so? The reply might 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 scores, 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 vital holdings, from the moomoo app

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

And for those who’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 provides 2 kinds of money administration funds, accessible on its app

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

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


  • Freshmen who don’t know easy methods to make investments, and are dissatisfied with their present financial savings returns
  • Conservative of us who need a secure funding / almost-zero threat 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

  • Freshmen who don’t know easy methods to make investments, and are dissatisfied with their present financial savings returns
  • Of us 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 traders who’re on the lookout for a versatile place to briefly maintain their warchest money, whereas ready for alternatives within the inventory market to seem

To seek 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 evaluation of how they work and what you could know.

And for those who’ve at all times been somebody with spare money who solely checked out mounted deposits, try T-bills and/or money administration funds as a substitute – you would possibly simply discover that they’re a greater, extra rewarding possibility for you.

Necessary be aware: 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 accountability to do your personal due diligence additional earlier than deciding what to do along with your cash.

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