6-month T-Bills Auction on 9 May – Will interest rates cross 4.0% or fall again? T-Bills a better buy than Fixed Deposit, Singapore Savings Bonds or Money Market Funds?

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So nan adjacent 6-month T-Bills auction is connected 14 May 2024.

After closing arsenic precocious arsenic 4.07% successful precocious 2023.

T-Bills yields past dropped arsenic debased arsenic 3.54%.

In nan astir caller auction however, T-Bills closed astatine 3.75% yield.

Bank fixed deposit rates person been steadily declining successful 2024 – pinch nan champion fixed deposit only offering 3.25% for 6 months.

So astatine 3.75%, 6-month T-Bills are a overmuch amended bargain than slope Fixed Deposits.

That said, nan latest Singapore Savings Bonds connection very charismatic yields astatine 3.33% – which fixed that this is locked successful for 10 years and tin beryllium redeemed immoderate time, is simply a decent replacement to T-Bills.

Couple of questions I wanted to talk today:

  1. What is nan estimated output connected nan adjacent 6-month T-Bills auction?
  2. Are T-Bills a amended bargain than Singapore Savings Bonds, money marketplace costs aliases fixed deposits?
  3. Where to parkland rate coming to maximise output and liquidity?

    

Next T-Bills auction is connected 9 May (Thurs) – (BS24109A 6-Month T-bill)

First disconnected – adjacent 6 months T-Bills auction is connected 9 May (Thurs).

This intends that:

  • For rate aliases SRS applications, nan deadline is 9pm connected 8 May (Wed)
  • For CPF-OA applications, nan deadline is 9pm connected 7 May (Tues)

Deadline for CPF-OA applications is aforesaid arsenic rate applications – for DBS Bank only

I’ve noticed precocious that pinch DBS Bank, nan deadline for CPF-OA applications (via ibanking) is nan aforesaid arsenic rate applications, truthful location is nary request to taxable 1 time earlier if you’re applying pinch CPF.

This looks to beryllium only for DBS Bank though, and for UOB/OCBC Bank you’ll still want to taxable nan CPF-OA exertion 2 days before.

What is nan estimated output connected nan adjacent 6-month T-Bills auction? – (BS24109A 6-Month T-bill)

I’ll divided nan study up into 2 parts:

  • Fundamental perspective (economic growth, inflation, world liking rates etc)
  • Technical perspective (supply-demand)

T-Bills waste and acquisition astatine 3.74% connected nan unfastened market

6-month T-Bills are trading astatine 3.74% connected nan unfastened market.

But… T-Bill trading liquidity is incredibly bladed (and truthful marketplace yields are not definitive)

But we’ve seen nan past fewer auctions that trading liquidity connected nan T-Bills is truthful bladed (just look astatine trading liquidity successful nan floor plan above) – that really nan marketplace pricing is not that indicative.

You’ll find that nan marketplace pricing really takes its cue from nan latest T-Bills auction.

The past fewer auctions wherever nan T-Bills auction output diverged materially from marketplace value (whether up aliases down).

It was really marketplace value that adjusted to nan latest T-Bills auction yield, alternatively than nan different measurement around.

So I would be aware against placing excessively overmuch reliance connected marketplace pricing connected T-Bills – location conscionable isn’t capable trading liquidity for existent value discovery.

12-week MAS Bills person gone up to 3.90% (vs 3.83% astatine nan erstwhile auction)

The organization only 12-week MAS Bills person gone up to 3.90% (was 3.83% astatine nan erstwhile auction).

Sharp moves successful MAS Bills are a bully parameter of nan inclination for T-Bills.

So arsenic of now, MAS Bills are pointing towards unchangeable / higher yields.

If you are submitting a competitory bid I do propose taking a speedy look astatine nan latest MAS Bills pricing earlier you apply.

If location is simply a crisp move up aliases down – that could propose a akin inclination for T-Bills (can entree it here).

Latest marketplace pricing connected liking complaint cuts – only 1 complaint trim successful 2024?

This week, Powell fundamentally confirmed that:

  1. It is improbable nan Feds will hike liking rates immoderate further from here
  2. However they will not trim liking rates until they spot ostentation coming down (and caller information shows this is not nan case)

With this news, nan marketplace is now pricing successful 0% chance of different complaint hike.

And only 1 liking complaint trim successful 2024 now.

So this is bully for nan 6-month T-Bills, arsenic it suggests constricted complaint cuts successful 2024.

From a Technicals, supply-demand position for T-Bills

From a much micro perspective, what matters is nan supply-demand dynamics.

T-Bills Supply is going up to $6.8 cardinal (vs $6.6 cardinal erstwhile auction)

The bully news is that nan magnitude of T-Bills connected auction is going up again.

$6.8 cardinal of T-Bills vs $6.6 cardinal of T-Bills nan erstwhile auction.

Amount of T-Bills is adjacent to nan highest it has been this cycle, and importantly higher than auction amounts successful each of 2022/2023.

T-Bills proviso seems to beryllium a beautiful decent predictor of T-Bills yields, truthful this is bully sign.

Demand for T-Bills dropped to $14.4 cardinal (vs $16.0 cardinal nan erstwhile auction)

More bully news – is that request for T-Bills dropped rather a spot from grounds levels successful nan astir caller auction.

$14.4 cardinal successful applications, vs $16.0 cardinal nan erstwhile auction.

That being said, you tin spot really request astatine $14.4 cardinal still remains very precocious compared to 2023 levels (although proviso has gone up importantly arsenic well):

There is simply a batch of money chasing aft T-Bills coming – and frankly it’s not difficult to spot why fixed slope fixed deposit rates support dropping (UOB One relationship conscionable dropped their interest rates to 4.0% successful a beautiful important drop).

Median Yield – Average Yield dispersed went up – much “lowballers”?

To exemplify what this is:

Imagine you person 100 bids.

The median yield, is if you put each nan bids from mini to high, and return nan output of nan 50th bid.

While mean yield, is adding up nan yields of each 100 bids and dividing by 100.

So mean yields are skewed by lowball bids, while median yields are not.

To put it simply – the bigger nan dispersed betwixt nan median output and mean yield, nan much “low-ballers”.

In nan latest auction – spreads continued going down and remains astatine very debased levels.

So nan bully news is that it seems investors are being rather fierce (or rational) pinch their competitory bids.

You could reason this is because yields person stabilised of precocious which leads to much logical bidding, but immoderate nan lawsuit this is simply a bully sign.

T-Bills yields down somewhat to 3.74% (vs 3.75% nan erstwhile auction)

T-Bills yields dipped somewhat nan past auction.

Closing astatine 3.74%, versus 3.75% nan erstwhile auction.

Estimated output of 3.70% – 3.80% connected nan 6-month T-Bills auction? (BS24109A 6-Month T-bill)

Let’s put it each together.

6-month T-Bills yields 3.74% connected nan unfastened market, and MAS bills are suggesting an uptrend / stabilisation successful yields.

Meanwhile request for T-Bills has travel down from grounds highs.

While nan proviso of T-Bills is going up this auction to $6.8 billion.

Bidding besides looks to beryllium beautiful logical nan past fewer auctions, fixed nan stabilisation successful yields.

Market is now only pricing successful 1 liking complaint trim successful 2024, which should beryllium bullish for yields.

Given each of nan supra – I deliberation location is simply a chance that T-Bills yields whitethorn spell up this auction (vs 3.74% nan past auction).

All things considered I would astir apt spell pinch an estimated output of 3.70% – 3.80% on nan adjacent T-Bills auction.

Do statement that this is conscionable an estimate, and existent yields tin alteration if request is very high, aliases bidding is funky.

Singapore Savings Bonds are really very charismatic this period – 3.26% output for first year

Note that this month’s Singapore Savings Bonds are really very attractive.

Yields connected nan Singapore Savings bonds are:

  • 3.26% for nan first 6 years
  • 3.33% for 10 years

This is very charismatic and higher than astir fixed deposit yields.

To nan constituent that I would expect very beardown request for Singapore Savings Bonds this month.

Note that each personification tin use for up to $200,000 Singapore Savings Bonds.

But fixed what is apt to beryllium beardown request for these Singapore Savings Bonds, I’m not judge you’ll spot afloat allotments.

BTW – we stock commentary connected Singapore Investments each week, truthful do subordinate our Telegram Channel (or Telegram Group), Facebook and Instagram to enactment up to date!

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Those utilizing UOB One Account whitethorn request to apical up different $50,000 successful May to bask nan afloat interest

Gentle reminder that pinch nan changes to UOB One Account liking rate, you request to apical up to $150,000 to bask nan afloat 4.0% liking rate.

It’s frankly up to you if you still want to usage UOB One Account aft this.

I’ve calculated nan effective liking rates below.

On nan afloat $150,000 it’s 4.00%, for money you tin retreat immoderate time.

Given that it’s still higher than T-Bills, I still went up to apical up my UOB One relationship to $150,000.

But do statement nan consequence that UOB tin further slash nan liking rates immoderate time, whereas pinch T-Bills you’re “locking in” yields for nan adjacent 6 months.

If you’re really concerned astir this and want to “lock in” yields for longer, do see nan Singapore Savings Bonds supra which locks successful for 10 years, and tin beryllium redeemed immoderate time.

Should you taxable a competitory aliases non-competitive bid for T-Bills?

I usually promote investors to taxable a competitory bid (just successful lawsuit location is simply a freak consequence and yields driblet a lot).

And taxable arsenic adjacent to nan deadline arsenic you can, truthful you tin return a look astatine wherever marketplace pricing is astatine that clip earlier deciding connected your bid.

But I cognize immoderate investors really don’t for illustration competitory bidding.

In which lawsuit non-competitive bidding is astir apt good arsenic well.

But do statement that pinch non-competitive, if location is simply a freak consequence and yields driblet to 3.0%, you are still forced to buy.

Which is simply a amended bargain – T-Bills vs Money Market Funds, Singapore Savings Bonds aliases Fixed Deposit aliases Savings Accounts?

Fixed Deposit rates support going down – champion 6 period output is 3.25% pinch RHB Bank

The Best Fixed Deposit option I recovered is 3.25% (3.30% for preferred banking) for 6 months pinch RHB Bank.

So if you don’t want to bargain T-Bills, but want thing consequence free (below nan $100,000 SDIC limit), this is astir apt nan adjacent champion thing.

Yields are much, overmuch little vs nan latest T-Bills though, truthful I don’t deliberation fixed deposit is that charismatic immoderate more.

Bank liking rates person been connected a dependable diminution nan past fewer months, and thing has changed truthful far.

Syfe Cash+ Guaranteed pays 3.75% – but it is NOT SDIC insured

I wrote a much elaborate article connected this successful nan Fixed Deposits post.

If you’re somewhat much adventurous – you tin use Syfe Cash+ Guaranteed (who past deposits nan rate into an organization fixed deposit deposit).

This allows you entree to organization fixed deposit rates which are importantly higher.

If you do this, these are nan latest rates connected connection – 3.75% for 3 months and 3.75% for 6 months:

To beryllium perfectly clear though, Syfe Cash+ Guaranteed is NOT SDIC insured.

This intends that dissimilar T-Bills (backed by Singapore government) aliases Fixed Deposit (SDIC insured up to nan limits), Syfe Cash+ Guaranteed is NOT consequence free.

This is made clear by Syfe connected their website.

Given that yields are very adjacent to T-Bills, you mightiness arsenic good conscionable instrumentality pinch T-Bills which is backed by nan Singapore authorities and consequence free.

Money Market Funds salary astir 3.5% – 3.8% yields – person stabilised of late

Money Market Funds yields person stabilised of late.

Mari Invest is paying astir 3.8% complete nan past 30 days for me.

The use pinch Money Market Funds for illustration Mari Invest aliases Fullerton SGD Cash Fund is that you tin get nan money backmost immoderate clip pinch T+1 liquidity.

The rates are besides competitory pinch T-Bills.

Do statement that pinch T-Bills nan yields are not locked successful and will up and down – truthful if location is simply a astonishment complaint trim from nan Feds you whitethorn spot money marketplace costs yields dropping.

Personally I clasp a operation of costs successful T-Bills and Money Market Funds for liquidity, and it’s been moving retired good for maine truthful far.

What to inquire yourself – divided rate betwixt T-Bills, Fixed Deposit and Savings Accounts?

A batch of you person asked what to see erstwhile deciding really overmuch rate to divided betwixt each of nan pursuing options:

  1. T-Bills
  2. Fixed Deposits
  3. Money Market Funds
  4. High Yield Savings Accounts

The measurement I spot it, it’s broadly a 2 measurement process:

  1. How overmuch liquid rate do you need?
  2. Rest goes into highest output options – based connected your comfortableness level connected risk

Key mobility to inquire – really overmuch liquid rate do you need?

I would opportunity nan cardinal mobility to inquire is really overmuch liquid rate you need, to meet your spending needs nan adjacent 6 months.

Think astir really overmuch you request to spend.

Then deliberation astir really overmuch rate you are expecting to travel successful complete nan adjacent 6 months.

The quality is nan magnitude of liquid rate you would need.

So if each of your spending needs are going to beryllium met by your salary, aliases if a large prize is coming successful – past you tin really tally very small liquid cash.

Whereas if you’re going to bargain a house, a caller car, aliases a large renovation, you’ll request to scheme up and person that magnitude of rate group speech successful liquid cash.

Some guidelines connected liquidity – amended safe than sorry

As a wide statement I would opportunity don’t beryllium stingy pinch liquidity.

It’s 1 of those wherever it’s amended to beryllium safe than sorry.

So aft you tally nan study supra – you’ll want to buffer for unexpected scenarios too.

For illustration a large aesculapian measure that you request to salary upfront, past declare from security after.

A large car repair bill.

A diminution successful stocks that leads you to want to bargain immoderate stocks / REITs.

A nonaccomplishment of job, meaning nary income successful nan short term.

Things for illustration that.

As a wide statement I would opportunity you ever want to person capable liquid rate connected manus to screen 6 months worthy of expenses, arsenic a worst lawsuit scenario.

Liquid Cash should spell into options accessible connected short announcement – savings accounts, fixed deposits, money marketplace funds

Once you person nan number above.

That magnitude of liquid cash, should spell into options that you tin get backmost pinch ideally a time aliases two’s notice.

That will include:

  1. High output savings accounts (eg. UOB One, OCBC 360) – arsenic a savings relationship you tin retreat immoderate time
  2. Fixed Deposits – tin break anytime by telling nan bank, though you will suffer accrued interest
  3. Money Market Funds – they are T+1 liquidity

Number (1) tends to person nan highest liking rates, though pinch nan caller alteration UOB One Account now only pays 4.0% connected $150,000.

That said it’s still higher than T-Bills, for a savings relationship you tin retreat immoderate time.

But I still deliberation this should beryllium nan privilege – and you shouldn’t move connected to fixed deposits aliases money marketplace costs until you’ve maxxed retired this action / group speech capable liquidity.

Singapore Savings Bonds is an outlier, because technically nan money only comes backmost astatine nan commencement of nan adjacent month.

In a worst lawsuit script if you conscionable missed nan redemption window, you mightiness request to hold a full period to get nan money back:

I would opportunity immoderate Singapore Savings Bonds is good arsenic you tin get nan money backmost reasonably quickly, but don’t overdo it and put 90% of your liquid rate into Singapore Savings Bonds.

Rest of nan rate goes into highest output options – based connected your comfortableness level connected risk

Once you person nan supra – nan remainder conscionable goes into nan highest yielding option.

As of today, that’s astir apt T-Bills, followed by Money Market Funds for illustration MariInvest aliases Fullerton SGD Cash Fund.

But Money Market Funds are technically not consequence free, truthful I cognize not everyone is comfortable putting their full nest ovum into thing that is not zero risk.

In which lawsuit you tin see overweighting T-Bills.

Picking betwixt T-Bills vs Money Market Funds vs Singapore Savings Bonds vs Fixed Deposit vs Savings Accounts?

I would opportunity if you want nan highest short word yield, T-Bills / Money Market Funds are astir apt your champion stake today.

The use of T-Bills is that it’s consequence free, and you fastener successful nan rates for 6 months, but astatine nan costs of liquidity.

The use of Money Market Funds is that you tin get nan money backmost anytime pinch T+1 liquidity, but it’s technically not consequence free, and nan rates up and down complete time.

Where americium I parking my rate for liquidity?

Personally, I’ve been parking my rate successful a operation of nan pursuing for liquidity:

Instrument

Approx Yield

Maximum

Risk Free?

UOB One

4.00%

$150,000

SDIC insured up to $100,000

Singapore Savings Bonds

3%+

$200,000

Yes (backed by Singapore government)

MariBank Account

2.88%

$100,000

SDIC insured up to $100,000

Mari Invest (or Fullerton SGD Cash Fund)

3.5% – 4.0%

No maximum

No

Maribank pays 2.88% connected up to $100,000, SDIC insured

The Maribank Savings Account pays 2.88% connected up to $100,000, pinch nary minimum amount, nary hoops to jump through, and SDIC insured.

Pretty overmuch a nary brainer if you person spare rate and want to make a higher output without immoderate lockup aliases immoderate requirements to fulfil.

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