What is a Singapore Treasury Bill (T-Bill)?

When it comes to managing excess cash, we can’t just leave it lying around without a plan — we want something that’s low risk but still earns a return. T-Bills are short term investment instruments, typically maturing within six months to one year, making them suitable for investors seeking safety and liquidity.

In Singapore, investors have many options to choose from and one of these are Treasury Bills (also known as “T-bills”) that are issued by the Singapore Government. Treasury bills  are short-term, government-backed securities issued by the Singapore government.

So, what exactly is a T-bill and what should investors know about them?

Singapore T-bills 101: An explainer

First, investors should understand a bit of context surrounding the debt that the Singapore Government issues.

The Singapore government is one of only a handful of countries in the world that is able to issue AAA-rated debt (i.e. the highest level of creditworthiness out there). That extremely low risk of default and strong ability to repay debt is a boon for Singapore’s individual investors, as these securities are backed by the Singapore government.

T-bills are essentially short-term Singapore Government securities. Individuals can easily buy T-bills via regular auctions carried out by the Monetary Authority of Singapore, typically for tenors of either 6 months or 1 year. 

Investors can buy them with a minimum of S$1,000 and in multiples of S$1,000.

T-bills don’t actually pay investors a coupon and, instead, you actually purchase them at a discount to face value (that’s the yield you’re getting).

Upon maturity of the T-bill, individuals will receive the face value back in cash. Selling out early from T-bills can result in higher costs given the low liquidity in the secondary market.

As with dividends from stocks, any interest income earned from T-bills are tax exempt so you receive the full face value of the T-bill upon maturity.

Singapore Government Securities (SGS) is the broader category of government debt instruments, which includes T-bills, SGS bonds, and other related securities. SGS bonds are longer-term instruments with semi-annual coupon payments, while T-bills are short-term securities within the SGS framework.

Investing in T-bills is a popular choice for those seeking low-risk, short-term returns.

Pros of T-bills

One of the most obvious benefits to T-bills is their safety aspect (although they are not insured by the SDIC), given Singapore’s impeccable credit rating and the full backing of T-bills by the Singapore Government. (although do note they are not insured by the SDIC),

T-bills offer a simple way to earn a return on excess cash. Since they’re issued at a discount and pay no coupons, investors receive the full payout at maturity — making the process straightforward and fuss-free. You will receive the full face value of the T-bill upon maturity. Beyond that, T-bills also offer a straightforward way to earn a yield on your excess cash by providing a return on your cash. The way that T-bills also distribute this yield helps investors simplify the process of investing – with no coupons to deal with as they are issued at a discount to face value.

Being able to use CPF or SRS funds to purchase T-bills also makes them a useful instrument to manage your retirement-focused cash. If you are planning to use your CPF OA (Ordinary Account) to invest in T-bills, you will need to ensure that you have sufficient funds and follow the required procedures.

Cons of T-bills

But what about the downsides of T-bills? Well, probably the most glaring one is the “reinvestment risk” associated with purchasing T-bills. The cut-off yield for specific T-bills (whether it's 6 months or 1 year) could then put you at risk of having to reinvest your principal (at maturity) at a much lower interest rate. Additionally, you are required to submit your application several business days before the auction date, and it is important to be aware of the specific number of days before the auction when applications close.

Furthermore, the fact that the liquidity of T-bills is rather constrained means that you may incur a capital loss if you sell before maturity due to market conditions.  While there is a secondary market in T-bills, the cost of selling into it can be high for T-bill holders.

How to Buy T-Bills in Singapore

If you’re looking to invest in T-Bills in Singapore, the process is straightforward and accessible to most investors. Here’s a step-by-step guide to help you get started with buying T-Bills, whether you’re using cash, your CPF, or SRS funds.

1. Check the auction schedule

Before you invest in T-Bills, you’ll want to check the latest auction schedule. The Monetary Authority of Singapore (MAS) regularly updates the auction dates, issuance sizes, and maturity periods for both the 6-month and 1-year T-Bills. You can check the MAS website for the most up-to-date information, so you know exactly when you need to apply.

2. Decide your investment mmount

T-Bills are issued in multiples of S$1,000, with a minimum investment amount of S$1,000. You can choose to invest as much as you like, provided it’s in these increments. Whether you’re investing with cash, your CPF Ordinary Account (OA), or Supplementary Retirement Scheme (SRS) funds, you’ll need to decide how much you want to allocate for T-Bills.

3. Choose your bid type: non-competitive or competitive

When applying for T-Bills, you can select either a non-competitive bid or a competitive bid. A non-competitive bid means you agree to accept the cut-off yield determined at the auction, ensuring you get an allocation if your application is successful. A competitive bid allows you to specify the minimum yield you’re willing to accept, but there’s a risk you may not get any allocation if your bid is too high.

4. Apply for T-bills

You can apply for T-Bills through the major local banks – DBS/POSB, OCBC, and UOB – using their ATMs or internet banking platforms. Simply follow the instructions to enter your investment amount, select your bid type, and provide any other required details. If you’re using CPF or SRS funds, make sure to select the correct account during your application.

5. Wait for the auction results

After the auction date, you can check the results on the MAS website to see if your application was successful and what the cut-off yield is. If your bid is successful, the T-Bills will be allotted to you at the cut-off yield, and your investment amount will be deducted from your chosen account.

How to think about Singapore T-bills?

For individual investors, Singapore T-bills can be a great way to get a yield on their short-term cash. However, they should remember that there are downsides to T-bills as well, such as constrained liquidity and reinvestment risk.

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