What is a T-Bill?
A Treasury bill (T-bill) is a short-term government security issued by the Monetary Authority of Singapore (MAS). T-bills have maturities of 1, 3, 6, and 12 months, and are issued through a weekly auction.
How Do T-Bills Work?
When you buy a T-bill, you are essentially lending money to the Singapore government. In return, the government agrees to pay you back the face value of the T-bill plus interest on the maturity date. The interest rate on T-bills is determined by the market demand and supply for the securities.
Benefits of Investing in T-Bills
There are several benefits to investing in T-bills:
- Low risk: T-bills are considered to be one of the safest investments available, as they are backed by the full faith and credit of the Singapore government.
- High liquidity: T-bills can be easily bought and sold in the secondary market, making them a very liquid investment.
- Diversification: T-bills can help to diversify your investment portfolio, as they are not correlated to other asset classes such as stocks and bonds.
How to Invest in T-Bills
To invest in T-bills, you will need to open an account with a brokerage firm that offers access to the Singapore government securities market. Once you have opened an account, you can participate in the weekly T-bill auction.
T-Bill Auction Process
The T-bill auction is held every Wednesday at 10:00am (Singapore Time). The auction is conducted by the MAS, and is open to all investors.
To participate in the auction, you will need to submit a bid to your brokerage firm. Your bid should include the following information:
- The amount of T-bills you want to buy
- The maturity date of the T-bills
- The yield you are willing to accept
The MAS will then determine the winning bids based on the highest yield offered. The winning bids will be awarded the T-bills at the auction yield.
T-Bill Yields
The yield on a T-bill is the annualized rate of return that you will receive if you hold the T-bill until maturity. The yield on T-bills is determined by the market demand and supply for the securities.
The following table shows the average yields on T-bills of different maturities as of July 1, 2023:
| Maturity | Yield |
|---|---|
| 1 month | 1.00% |
| 3 months | 1.25% |
| 6 months | 1.50% |
| 12 months | 1.75% |
Tips for Investing in T-Bills
Here are a few tips for investing in T-bills:
- Consider your investment goals: Before you invest in T-bills, it is important to consider your investment goals. T-bills are a low-risk investment, but they also offer a relatively low return. If you are looking for a higher return, you may want to consider other investments such as stocks or bonds.
- Do your research: Before you invest in T-bills, it is important to do your research and understand how they work. You should also understand the risks involved in investing in T-bills.
- Diversify your investments: T-bills can be a good addition to a diversified investment portfolio. However, you should not invest all of your money in T-bills. You should also invest in other asset classes, such as stocks and bonds, to reduce your overall investment risk.
Conclusion
T-bills are a safe and liquid investment that can help you to diversify your portfolio. However, it is important to understand how T-bills work before you invest in them. By following the tips above, you can make informed investment decisions and achieve your financial goals.
Additional Information
- The minimum investment amount for T-bills is S$1,000.
- T-bills are exempt from income tax in Singapore.
- You can hold T-bills until maturity or sell them in the secondary market before maturity.
