MAS Treasury bills (T-bills) - earn higher interest than banks' fixed deposits

I am going to share with you about (i) how you can get better interest rates than putting money into banks' fixed deposits (FD)and (ii) avoid the queues.

First of all, there is the Singapore Savings Bonds (SSB). I have written about SSB and why it could be part of our emergency funds in 2018. In recent months, SSB interest rates had been more and more attractive and I have been building a laddered SSB since then. You can read more about the benefits and features about the the SSB in that post. The best thing I like about SSB is the ability to redeem it early with accrued interest. October 2022 SSB effective interest rate for 10 years is 2.75%. In fact, I am expecting November 2022 SSB to be above 3%! So watch out for it, you have been informed in advance. 

I am not going to waste time writing about SSB since you can find more under the SSB label. Instead I want to share more about Treasury bills (T-bills). 

Since late July, I noticed that the Treasury bills (T-bills) have also gotten attractive. T-bills are essentially short-term Singapore Government Securities (SGS) issued at a discount to their face value. Investors receive the full face value at maturity. The Government issues 6-month and 1-year T-bills. 

I have been applying for the last 4 issuance of 6 months T-bills. The recent 6 months T-bill was auctioned at a cut off yield of 3.32%. This is way above any fixed deposits rates offered by any banks in Singapore.

For the 1 year T-bills, there are only 4 issuance in a year. The next one is in mid October. On the other hand, there are more issuance of the 6 months T-bills, twice a month to be exact. You can view the issuance calendar here. Since 6 months T-bills happen more frequently, I shall use the 6 months one as an example.

The next 6 months T-bill will be auctioned on 29 Sep and issued on 4 Oct. You will not know the yield (interest rate) till the auction is over. To apply for the 6 months T-bill, you need to apply for that T-bill via ibanking website (e.g. DBS, OCBC, UOB) at least a day before the auction. So if the auction date is 29 Sep, you can start applying a few days before on let say 26 Sep. You need to apply it a day before the auction date closes (in this case, you need to apply by 28 Sep, 9pm). Do note, you cannot use ibanking mobile application to apply. 

When I mention apply, it actually means you are bidding for that bill. So how to bid? You need to bid :

- the amount you want to put into that T-bill in multiples of $1,000.
- choose whether you are submitting a competitive or non-competitive bid. Non-competitive bid means that you are fine with any interest rate. For competitive bid, you need to indicate the yield.
- (if you choose competitive bid) You need to indicate the yield you want (e.g. 3.33%). 

The last issuance cut off yield was 3.32%. If you had submitted a competitive bid of anything above 3.33%, you will get a full refund of your money. If you had submitted a bid of 3.31% and below, you get full allocation. If you had submitted a bid of 3.32% (i.e. the cut off yield), you will get partial allocation since that is the cut off yield. 

When you have a successful bid, you will be issued the T-bill at a discount to the face value based on that cut off yield. Which means the discount amount will be refunded to your bank account at night on  auction date.

If you had read till the end, here is a bonus for you. There is no application fee for submitting a bid for T-bills.