Treasury bill interest rates soar in Singapore

Retail investors have taken notice of the rising rates on Singapore’s Treasury bills (T-bills), and more are now choosing to invest with their Central Provident Fund (CPF) money.

According to the Monetary Authority of Singapore (MAS) and the CPF Board, more than 3,000 successful applications totalling S$450 million were made to invest CPF Ordinary Account deposits in the three T-bill auctions last month.

In January, when T-bill interest rates were less than 1%, there was only one such application.

“The increase in T-bill applications made through the CPF Investment Scheme (CPFIS), and more generally the increased retail participation in T-bills, is likely due to the higher interest rates which have risen alongside global interest rates throughout 2022,” MAS and CPF Board said in a recently issued joint statement.

T-bills are short-term financial securities with maturities of one year or less that are issued and backed by the Singaporean government. Two auctions for T-bills with a six-month tenor and one for a one-year maturity were held in October.

T-bill yields have been rising in line with the rise in other government securities like the Singapore Savings Bonds as central banks across the world rush to raise interest rates to fight inflation. The cut-off yield for the most recent six-month T-bill auction was 4.19 per cent annually, which was the highest since 1988.

This indicates that T-bill returns have exceeded not only the 2.5% interest rate offered for funds in CPF Ordinary Accounts but also the higher interest rate of 4% for Special, MediSave, and Retirement Accounts.