T-bills and CPF Time Deposit
DBS bank has an article about investing in T-bills and I think it rightly pointed this out:
"It is not as straightforward as you will need to work out the “breakeven” yields of T-bills for using CPF savings to ensure that you will not be in a worse off position.
This is partly because the interest computation of CPF balances is affected by the transactions in your CPF account. Contributions received this month start earning interest next month and withdrawals/deductions in this month will not earn interest from this month onwards.
Depending on when the deduction is done from your CPF account, you might lose up to two months of CPF interest. Taking that into account, these are the cut-off yields for T-bills that will result in a higher return than that of CPF-OA and SA yields."
Given the current interest at around 4%, it's still worthwhile to put some CPF OA money into T-bills for me. In my previous post on money flow and management, I talked about what I was doing with my war chest and the role of T-bill in my cash deployment.
For more information about T-bills by MAS, check this out https://www.mas.gov.sg/bonds-and-bills/singapore-government-t-bills-information-for-individuals
and the issuance calendar https://www.mas.gov.sg/bonds-and-bills/auctions-and-issuance-calendar
It seems like FED's rate hike is not over just yet. Let's see what will the next T-bill auction yield.
By the way, DBS has finally joined the interest hike bandwagon by offering a 5-month FD of 3.9%. Not bad.
Stocks and crypto investments seemed to have taken a back seat these days. Capital-guaranteed average return rules! See, no need to fry brain cells to do your due diligence (DYDD) in picking the "correct one", nor have sleepless nights looking at price charts and worrying about the loss of capital.
Here we have in order of minimum to maximum DYDD:
Top up CPF for 1M65 --> Do T-bills and FD --> DCA into ETFs --> DCA into stocks --> Active investing / stocks picking
I am reverting to laziness.
Thanks for reading!
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Hi there,
ReplyDeleteIndeed, this current high interest climate is a boon for those risk averse people who hoard cash instead of investing the money. Now they have a wide range of avenues to park their cash hoard.
When the T-bill yield started to cross 3% in Sep last year, we moved our warchest into them. And we exhausted our warchest hoard, we started to move our OA funds into T-bills as well. All in all, we have parked about $1.7M into T-bills comprising cash, SRS funds and OA funds. For our OA funds, we are a little more judicious in making sure the yield is at least 4% before we place them into the T-bills. That we do by putting competitive bids of 4%. So far we managed to secure around $1.3M of T-bills for our OA funds with yield from 4% to 4.4%.
Last year when OCBC offered 3.4% interest for their FD for OA funds, I called them to enquire if they would offer me a higher interest if I put in $1M of OA funds but they didnt accede to my request. At 3.4% interest, it was not worth using the OA fund for the FD.
Our T-bills bought from Sep last year should start to mature in Mar this year, thus allowing us to catch the expected higher yields coming this year. Lets see