Should you invest your CPF money in T-bills?

What are treasury bills (T-bills)? T-bills refer to short-term Singapore government bonds or Singapore treasury bonds that the Monetary Authority of Singapore (MAS) issues based on a regular schedule. This ensures a level of security unparalleled when considering investments in Singapore. 

What are T-bills, and how do they relate to my CPF funds in Singapore?

Singapore government-issued treasury bills have two maturity periods: 6 months and 1 year, allowing investors a measure of flexibility when it comes to their individual portfolios. Alternatively, Singapore Government Securities (SGS) bonds have a maturity rate between 2 and 50 years, appealing to the more long-term investor looking to contribute to their full retirement sum. T-bill investors accumulate interest by subtracting the initial bond price from the final bond value once it reaches maturity.

Since the end of March 2023, all three Singapore banks have allowed customers to use their CPF savings to apply for Treasury bills (T-bills) online, with DBS the first to do so in late January 2023. Previously, those who wanted to use their CPF savings for T-bills had to queue at the banks — with reports of customers queuing for hours in order to do so. 

As of now, the CPF Ordinary Account (OA) is paying a base interest rate of 2.5% per annum, with the Special, Medisave and Retirement accounts paying upwards of 4% per annum. The average yield of T-bills in Singapore is paying upwards of 3.5% today, allowing Singaporeans to compound their additional CPF interest with their T-bill yields.

Still, here are some things that savers should note before investing all of their CPF savings into T-bills.

Should I invest my CPF money in T-bills?

According to the Monetary Authority of Singapore (MAS), bids need to be submitted by noon on the auction date; see the T-bill auction schedule and historical yields.

For example: Going for the auction that happened on 20 June 2024 would require Singaporean investors to place bids before 12 pm on the day. Results are typically released about 2 hours after the cut-off time.

This allows Singaporean T-bill bidders time to carefully gauge just how much they are willing to bid and to decide if that particular auction makes the most sense for them. 

This showcases a strong advantage to investing in T-bills, as the frequency and flexibility, alongside the constant nature of the yields, can prove attractive to the casual investor.

However, CPF accrued interest is calculated based on the amount housed in your OA account. This means that by investing your CPF funds in T-bills, you tend to lose out on 2 months of guaranteed interest while withdrawals or contributions are being made to your account. CPF interest is computed monthly and compounded annually, meaning the 2 months lost per year can add up over time.

T-bill yields have fallen. Can I trust T-bill returns to stay up?

While Singapore T-bills continue to remain at levels higher than a year ago — and indeed higher than the 2.5% p.a. CPF OA interest rate — investors will have to monitor the yield trend ahead. The yields of Singapore T-bills track those of US Treasuries, which are steadily rising as the US Federal Reserve tightens its monetary policy.

In December 2023, T-bill returns reached a high of 4.14%, before steadily dropping to 2.99% on the issue auctioned on 16 Jan 2025. Calculate your T-bill returns in 2025 here.

While one can be sure of fluctuation in how the T-bill yield shifts, T-bill projected returns per annum show a trend of averaging higher compared to the year before and are generally higher than the interest rates offered by one’s CPF OA — investors should continue to monitor the interest rates going forward.

While a continuous passive stream of income using T-bill returns and CPF interest can prove a shrewd form of action for any Singaporean, inflation could be an issue in the future. 

How do my CPF monies beat inflation?

Singapore’s core inflation rate has dropped from 5.5% in January 2023 to 3.1% in March 2024. The key consumer price gauge reached the smallest rise of 1.9% in November 2024, in contrast to November 2021, when it climbed by 1.6%.

While this is positive, there is no predicting inflation data in Singapore over the next 5 years, or the next decade.

Just as the core inflation rate has dropped now, it may fluctuate. How do we stay on top of an unpredictable variable?

Read more: Why market returns can come up ahead of CPF OA rates

Take measured risks with your CPF OA investments

Remember to not just diversify your cash savings solutions according to your immediate and short-term needs and priorities, but also keep your long-term financial goals in mind.

As for CPF OA monies, it is worthwhile to look at how you are investing beyond low-risk cash management products that do not beat inflation rates. Investors should review their long-term commitments and can consider putting money into investment-grade bonds that are also rising in yields, or in global stocks if you are willing to take more measured risks. 

For starters, you may seek out diversified portfolios or investment funds, then commit to a regular investment plan through a dollar-cost averaging strategy. 

Endowus Flagship Portfolios are designed to give investors broad exposure to global markets in a strategic and passive asset allocation. This is opposed to a tactical — or short-term and opportunistic — allocation. It is also unlike an active allocation that most of our competitors espouse. Our allocation strategy means that we largely track the global indices over time.

Most investors should start with a core allocation for long-term wealth accumulation. This can be done through our Flagship passive Portfolios. At Endowus, all core portfolios are globally diversified, have a strategic passive asset allocation, are low-cost in nature to take advantage of the broad market opportunities, and generate long-term compounding returns.

With Endowus Cash Smart solutions, investors can redeem funds from your cash management portfolios at no additional cost. For investors who want flexibility, having no lock-in restrictions is a perk.

Learn more: Latest recommended portfolio changes to Flagship CPF Portfolios

To learn more about T-bills, Singapore Savings Bonds, and other cash management solutions, refer to this article. To start investing your CPF with Endowus, click here.