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

Jul 2024
Feb 2023
Income, cash management - investing CPF in T-bills
  • What are T-bills, and why is everyone talking about investing my CPF funds into them?
  • The positives and negatives of T-bills, and how to be prepared for every eventuality.
  • While a low-cash passive stream of investment can be beneficial, inflation may require a longer-term plan of action.
  • The Endowus core Flagship CPF portfolios generate long-term compounding returns that diversify your portfolio beyond T-bills and CPF returns.

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

Singapore government-issued treasury bills have 2 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 Central Provident Fund (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 Central Provident Fund (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?

As per the Monetary Authority of Singapore (MAS), bids need to be submitted by noon on the auction date; see T-bill schedule here. For example: going for the auction that happened on the 20th of June 2024 would require Singaporean investors to have bid before 12pm 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

Issue code ISIN code Auction date Issue date Maturity date Auction tenor (week) Auction amount (S$M) Amount applied (S$M) Bid-to-cover ratio Cut-off yield (%)
BS24107N SGXZ93751485 11 Apr 2024 16 Apr 2024 15 Oct 2024 6 6,300 15,980.30 2.54 3.75
BY24101X SGXZ80447410 18 Apr 2024 23 Apr 2024 22 Apr 2025 12 5,100 10,052.47 1.97 3.58
BS24108V SGXZ83501924 25 Apr 2024 30 Apr 2024 29 Oct 2024 6 6,600 14,390.62 2.18 3.74
BS24109A SGXZ25011966 09 May 2024 14 May 2024 12 Nov 2024 6 6,800 16,296.96 2.4 3.7
BS24110T SGXZ12438883 23 May 2024 28 May 2024 26 Nov 2024 6 7,000 14,465.47 2.07 3.65
BS24111X SGXZ81105322 06 Jun 2024 11 Jun 2024 10 Dec 2024 6 7,100 14,220.28 2 3.76
BS24112W SGXZ29011285 20 Jun 2024 25 Jun 2024 24 Dec 2024 6 6,600 15,457.04 2.34 3.74
BS24113N SGXZ29447257 04 Jul 2024 09 Jul 2024 07 Jan 2025 6 6,500 15,582.93 2.4 3.7

Source: Monetary Authority of Singapore

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?

The yields of Singapore T-bills track those of US Treasuries, which are steadily rising as the US Federal Reserve (Fed) tightens its monetary policy. 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. 

Source: MAS

In December 2023, T-bill returns reached a high of 4.14%, before steadily dropping to 3.82% on the 19th of April 2024. It then took a sharp spike on 23 April and has remained relatively constant since then. On the 26th of June, the T-bill results in Singapore presented itself at 3.94%, a marked increase from April. Calculate your T-bill returns in 2024 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. 

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

How do I beat Inflation?

Singapore’s core inflation rate has dropped from 5.5% in January 2023 to 3.1% in March 2024 and has stayed constant at that level up until May 2024. 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 as of now, it may rise within the next year. How do we stay on top of an unpredictable variable?

Source: CNA and Endowus

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 if you are willing to take more measured risks. 

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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