Should you invest your CPF money in T-bills?
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Should you invest your CPF money in T-bills?

Jun 2023
Feb 2023
Income, cash management - investing CPF in T-bills
  • With Singapore Treasury bills (T-bills) now paying more than 3%, investors are hoping to capture that additional interest off their CPF savings.
  • However, savers may lose more than six months of CPF interest if they use their CPF savings to invest in T-bills.
  • If you want to beat inflation, it’s a good idea to also diversify beyond low-risk cash management products.
  • The Endowus core Flagship CPF Portfolios are globally diversified, low-cost, and generate long-term compounding returns. To get started with Endowus, click here.

Since end-March 2023, all three Singapore banks have allowed customers to use their Central Provident Fund (CPF) savings to apply for Treasury bills (T-bills) online, with DBS the first to do so in late-January. 

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. 

The popularity of this option is clear: DBS told The Straits Times that nine in 10 T-bill applications for the 2 Feb 2023 auction were made online using CPF funds. 

This comes as the CPF Ordinary Account (OA) is paying interest of 2.5% per annum (p.a.) — the legislated minimum — on the savings. Today, T-bills are paying north of 3%, so savers are looking to capture that additional interest off their CPF savings.

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

Beware the lost interest with CPF and T-bills

Savers can lose more than six months of CPF accrued interest when choosing to use their CPF savings to invest in T-bills. As CNA reported, to participate in a T-bill auction at the end of October 2022, you would have to put in a bid before the auction date (27 Oct 2022).

Given that the T-bill was issued on 1 Nov 2022 and matures on 2 May 2023, that means there would be eight months during which the investor’s CPF OA money does not earn interest. 

Subtract out the fees, and an investor who placed $10,000 in the end-Oct tranche of the six-month T-bill from his or her OA savings will earn excess interest of just $35.45.

T-bill yields have fallen

Chart: Cut-off yields of the benchmark 6-month Singapore Treasury bill (T-bill) have come down since the high of 4.40% in the 8 Dec 2022 auction. As of the 11 May 2023 auction, cut-off yields for T-bills were 3.78%. Source: MAS Treasury Bills Statistics
Source: MAS

The benchmark six-month T-bills had a yield that hit a 30-year high of 4.4% p.a. in December last year, as global rates rose and demand surged. Since then, their yields have fallen; the latest six-month T-bill sold in the 11 May 2023 auction offered a cut-off yield of 3.78% p.a. Back in March 2023, the cut-off yield had hit a five-month low of 3.65%.

The yields of Singapore T-bills track those of US Treasuries, which have fallen as the US Federal Reserve (Fed) narrows its interest-rate hikes. While Singapore T-bills 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. 

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

Diversify with cash management, Income Portfolios, Flagship Portfolios, Amundi low-cost passive index funds

The yields of Endowus' Cash Smart Secure solution have been rising, and the Endowus platform allows you to redeem your funds from your cash management portfolios at no additional cost. For investors who want flexibility, having no lock-in restrictions is a perk.

It is also 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 that have hit new lows in 2022. 

For instance, Endowus has upped the payout targets for its Income Portfolios so you can make your cash savings work harder.

Finally, 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. 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 an allocation to the Endowus core strategies 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. Learn more about how we made our Flagship CPF Portfolios even better with the latest recommended portfolio change.

You may also check out the Amundi low-cost passive index funds that have since early April 2023 been made available for CPF investing through Endowus. The two funds — Amundi Prime USA Fund and the Amundi Index MSCI World Fund — are the lowest-cost funds on the CPF Investment Scheme, and have also been included in the Flagship CPF Portfolios. Read more about the Amundi funds here.

To learn more about T-bills, Singapore Savings Bonds, and other cash management solutions, refer to this article.

Learn more about CPF investing with our CEO here. For more about our Flagship Portfolios that are available for CPF, Cash and SRS, click here or get started here.

To start investing your CPF with Endowus, click here.


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