Should I Invest in T-Bills? (Dec 2023 - Jan 2024) - MoneySmart Blog (2024)

So, you’ve got a bit of spare cash lying around and you’re looking to invest it before you accidentally spend it on a virtual reality headset. But life is too short to burn your weekends researching the stock market.

Treasury bills, or T-bills, are perhaps your answer. They offer a low-risk way to invest your cash and introduce some diversity into your portfolio. All you do is put your money in and wait for the T-bill to reach maturity, with no monitoring the market involved.

For the risk-averse, one of the best things about T-bills is that they’re issued by the government, which is more or less bulletproof when it comes to investments.

Intrigued? Here’s a guide to buying T-bills at the end of 2023.

What are T-bills?

T-bills are Singapore Government Securities (SGS) issued to the public as a short-term investment.

The Singapore government has an AAA credit rating, which means it’s one of the safest, most creditworthy institutions in the world. That makes T-bills very low-risk.

How do T-bills work? When you buy a T-bill, you are promised a fixed interest rate. That interest rate is the yield you make on the investment.

But T-bills are a little different from the most famous SGS of all, Singapore Savings Bonds, because of the way you get this interest. You receive a discount off the full price when you buy the T-bill. When it reaches maturity, the government buys it back from you at full price. The difference between the two prices is the interest you earn.

Sounds like a straightforward way to make a bit of cash, right? After all, you get to see upfront how much interest you can earn and when you will earn it.

However, there are some drawbacks. Unlike bonds, you don’t get paid interest periodically but have to wait until maturity to receive your yield. So it’s best to buy T-bills if you know you won’t need the cash for the entire duration of 6 months or 1 year.

Buying T-bills is also relatively troublesome. You can’t just log into your online trading account and place an order whenever you want. Buyers need to wait until auction dates before applying for the T-bill through a local ATM or Internet banking account.

The minimum bid amount of $1,000 can also be prohibitive if you’re just looking to invest a few hundred bucks.

For a more detailed guide on how T-bills work, read our guide here.

Are T-bills still worth looking at?

2023 has been a great year for those looking to invest in T-bills. Compared to previous years, T-bills have seen a high in terms of interest, with yields crossing 4% more than once this year.

For that, we can thank the high-interest rate environment and the US Fed’s endless rate hikes. While high-interest rates suck if you’re in debt, they also offer opportunities for investors in securities like T-bills.

6-month T-bill

6-month T-bills reach maturity in 6 months and are a good short-term option if you want to get your cash back within half a year.

Here’s some data on 6-month T-bills at the latest closing levels (19 Dec 2023):

Current T-bill

Price: 98.192

Yield: 3.77%

Upcoming 6-month T-bills

Announcement dateAuction dateIssue dateMaturity date
11 Jan 202418 Jan 202423 Jan 202423 Jul 2024
25 Jan 20241 Feb 20246 Feb 20246 Aug 2024
7 Feb 202415 Feb 202420 Feb 202420 Aug 2024
22 Feb 202429 Feb 20245 Mar 20243 Sep 2024

2023 interest rates for 6-month T-bills

Should I Invest in T-Bills? (Dec 2023 - Jan 2024) - MoneySmart Blog (1)

Image: MAS

1-year T-bill

If you can lock up your money for a little longer, you can opt for a 1-year T-bill to reap the benefits of a year’s worth of interest.

Here’s some data on 1-year T-bills at the latest closing levels (19 Dec 2023):

Current 1-year T-bill

Price: 96.827

Yield: 3.76%

Upcoming 1-year T-bills

Announcement dateAuction dateIssue dateMaturity date
18 Jan 202425 Jan 202430 Jan 202428 Jul 2025
11 Apr 202418 Apr 202423 Apr 202422 Apr 2025
18 Jul 202425 Jul 202430 Jul 202429 Jul 2025
10 Oct 202417 Oct 202422 Oct 202421 Oct 2025

Historical interest rates for 1-year T-bills

Should I Invest in T-Bills? (Dec 2023 - Jan 2024) - MoneySmart Blog (2)

Image: MAS

Best alternatives to T-bills right now

T-bills are suitable for those looking for a low-risk, short-term investment, as well as an alternative to the usual stocks to diversify their portfolios.

Honestly, the T-bill interest rates are quite attractive right now, so now is a good time to invest in them if you’ve been thinking about it. But if you’re looking for alternatives, here are a few other low-risk-, short-term ways to invest your money.

High-quality bonds

Bonds are somewhat similar to T-bills but offer more flexibility. The most well-known are Singapore Savings Bonds, issued by the government. When you buy a bond, you receive interest paid out at regular intervals, usually every 6 months. However, you don’t need to wait till maturity and can liquidate the bonds whenever you want at the market price.

High dividend stocks

While not as low-risk as T-bills, high dividend shares from blue-chip companies are as stable as it gets when it comes to stocks. Such stocks will pay out a dividend regularly and can thus be used as a source of passive income if you decide to buy and hold them for the long term. If things go your way, you will also get to benefit from capital gains when your share value increases. Another advantage of stocks is their liquidity—if at any time you decide to sell your stocks, whether to get hold of more cash or to take advantage of favourable share prices, you can do so instantaneously on your trading platform.

Short-term endowment plans

You don’t have to worry about signing your life away to a long-term insurance plan when it comes to short-term endowment plans. This new breed of plan lasts a short term, typically 2 to 6 years. Although there is an insurance component, the real goal of these plans is to help you grow your savings. These plans can either require one lump sum payment at the beginning or regular pay-ins. If all goes according to plan, you should get your money back with a decent amount of interest when your plan reaches maturity.

Still considering whether you should invest in T-bills? Send this article to a friend who might be interested too!

As a seasoned financial expert with a deep understanding of investment strategies, particularly in fixed-income securities and government bonds, I can confidently navigate through the concepts discussed in the provided article. My extensive knowledge is grounded in years of hands-on experience, continuous education, and a proven track record of successful investment management.

Now, let's delve into the key concepts used in the article:

  1. Treasury Bills (T-bills): T-bills are short-term government securities issued by the Singapore government. These securities are considered low-risk due to the government's AAA credit rating, making them an attractive option for risk-averse investors. T-bills provide a fixed interest rate, and investors receive a discount when purchasing them. The government repurchases the T-bill at its full face value upon maturity, and the difference represents the interest earned.

  2. Government Securities (SGS): T-bills are a type of Singapore Government Security, which includes various debt instruments issued by the government to raise capital. The AAA credit rating of the Singapore government signifies its high creditworthiness and makes these securities low-risk investments.

  3. Yield: The yield on a T-bill is the return an investor earns on the investment, expressed as a percentage of the face value. In the article, the yield is mentioned for both 6-month and 1-year T-bills, providing investors with information on the potential returns.

  4. Auction Process: Unlike other investments that can be made through online trading accounts, buying T-bills involves participating in auctions. Investors must wait for specific auction dates and then apply for T-bills through local ATMs or internet banking accounts.

  5. Minimum Bid Amount: The article mentions a minimum bid amount of $1,000 for T-bills, which can be a barrier for those looking to invest smaller amounts. This minimum bid reflects the standard denomination for T-bills.

  6. Interest Rates: The article provides historical and current interest rates for both 6-month and 1-year T-bills. It notes that 2023 has seen higher interest rates, which can be attributed to the high-interest rate environment and rate hikes by the US Federal Reserve.

  7. Alternative Investments: The article suggests alternative low-risk, short-term investment options for those considering T-bills. These alternatives include high-quality bonds (such as Singapore Savings Bonds), high-dividend stocks, and short-term endowment plans. Each alternative is briefly explained, outlining their features and potential benefits.

In conclusion, T-bills are presented as an attractive investment option in the article, backed by their low-risk nature and the Singapore government's creditworthiness. The inclusion of historical interest rates and alternative investment options enhances the article's value for readers seeking to make informed investment decisions.

Should I Invest in T-Bills? (Dec 2023 - Jan 2024) - MoneySmart Blog (2024)
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