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4.19% yield T-bill! What is next? Stunned like vegetable!

Friday, October 28, 2022

On 18 October, I shared my thoughts in a blog on growing passive income in an environment of heightened inflation and rapidly increasing interest rates.

If you cannot remember or need a refresher, here it is:

Growing passive income: Equities, CPF and bonds.

I submitted non-competitive bids for 6 months T-bills for both auctions in October.

The cut off yields were 3.76% and 4.19% respectively.

Source: MAS.





I will be submitting non-competitive bids for 6 months T-bills for auctions in November and December too.

This is because I expect their yields to be much more attractive than 6 months or even 1 year fixed deposit interest rates offered by the banks.

Cut-off yield at 4.6% p.a. next?

After all, the U.S. Fed is expected to hike interest rates in November and again in December.

I would avoid long duration bonds in such an environment of rapidly rising interest rates.

For sure, I would avoid bond funds.

If you are new to my blog or if you have forgotten, here is a refresher from my YouTube channel:





Remember, no one cares more about our money than we do.

Do not ask barbers if we need a haircut.

If we are not overleveraged or overly leveraged, we don't have to fear rising interest rates. 

We have not been swimming naked and don't have to fear what the receding tide might reveal.

Yes, I know. Bad AK! Bad AK!

If we are invested in bona fide income generating assets and if we are getting a share of the income, there is really no need to panic (as long as we have a good handle on our expenses.)

The sky is not falling.

We will still enjoy some level of cash flow even during tough times.

This is what ultimately matters.

Simply, it is to keep us afloat.

Related to this:
Simple investment wisdom keeps us afloat.




Unfortunately, it sometimes takes a crisis for some people to realize that reliable and meaningful cash flow is one of the most important things to prioritize in investing and personal finance.

Getting rich slow is not sexy but it works.

Readers who have been following my blog for a long time might remember that I said this:

"Gradually, as our passive income grows from a stream to a river, our earned income could become something less critical.
Source: Best insurance in life.

If AK can do it, so can you!

Gambatte!




Recently published:
1. SSB is 2.44x oversubscribed.
2. Daiwa Logistics Trust: FX and TA.
3. CLCT: Staying defensive and Chinese banks.

If you want to find out more about T-bills, this is a good resource by DBS: Apply for T-bills.




14 comments:

keng said...

Hi AK,

It really makes sense to subscribe to these short term T-bills now especially if one doesn't have immediate need for his funds. Why put in banks or fixed deposits when you have a better alternative right? :)

AK71 said...

Hi keng,

Yeap, absolutely. :D

Short duration bonds is the way to go when interest rates are rising so rapidly.

I must thank people for leaving their money in fixed deposits as I am invested in all three local lenders. ;p

garudadri said...

Dear AK
As of now, this is ok. It will be much more than earlier that rate increases will stall and then the yields will fall. The ten year US treasury yield is already back at 4 after peaking at just under 4.5
Fedwatch expectations are moderating as well. I have decided to take on more equity risk at this juncture to get not only yield but also potentially capital gains with a circa 10% return
I am well ware that I am putting capital at risk
UOB did very well, better than anticipated
The other two report next week and are already rising in the market
This gives me the “courage premium” to buy other dividend stocks and REITS now, albeit with considerable risk.
Let us see how I fare after 12 to 18 months!
Best wishes
Venkatesh

AK71 said...

Hi Venkatesh,

I don't mind if the yield on T-bills fall from here.

Then, I wouldn't have to make the dreaded visit to the bank. ;p

Seems like Mr. Market is expecting the Fed to pivot although I don't think it will happen but no one cares what I think, of course.

We are probably in for a year end bear market rally.

Nice change from all the doom and gloom. :)

Sandra said...

Hi AK, can you discuss with yourself if the current interest rates may at least persist, if not increase a little more, until first half of next year?

AK71 said...

Hi Sandra,

Alamak.

This one you must go ask J. Powell in U.S.A. liao. ;p

Mr. Market seems to be expecting +0.75% in Nov and +0.5% in Dec.

Next year, maybe another +0.5%.

That's what people are saying.

So, if they are correct, interest rates in Singapore will continue rising for a few more months at least.

EX said...

Hi AK, I have read the page you shared on how to apply for T bills via DBS. There is a bullet point that says:

However, please note that the prices of bonds may rise or fall before maturity & customers may lose their principal amount.

I thought we will get back the principal amount after 6 months? Can you please help explain what the above point means in terms of risk?

Thanks!

AK71 said...

Hi EX,

Oh, we will get back our principal sum as long as we hold till maturity.

Zero risk.

It is only if we decide to sell the T-bill before the maturity date that we have to beware.

T-bill can be sold on the stock exchange before the maturity date.

EX said...

Hi AK, understood! Thanks 👍

AK71 said...

Hi EX,

Just talking to myself, of course. ;p

Yv said...

Hi AK,

MAS and CPF Board said they are working with local banks to enable online applications for T-bills using CPF funds. But it will probably take time as they will need to enhance existing systems to cater for this.

Link to article:
https://www.channelnewsasia.com/singapore/invest-t-bills-treasury-bills-cpf-ordinary-account-3040226

AK71 said...

Hi Yv,

Ah, this would make things much easier and should have been done much sooner.

Thanks for sharing this. :D

RP said...

Hi AK,

Not that I want to challenge your knowledge in these matters, but I believe the SG T-bills can only be sold before maturity by a personal visit to one of the three main banks head office?

https://www.mas.gov.sg/bonds-and-bills/Singapore-Government-T-bills-Information-for-Individuals

"Secondary market trading At DBS, OCBC and UOB main branches."

AK71 said...

Hi RP,

Oh, no worries.

I have never been interested in T-bills until recently.

So, plenty of stuff I don't know, I am sure. :)


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