4% yield T-bill 3.2x oversubscribed! What's my plan?

Latest 6 months Singapore Treasury Bills (T-bills) auction had a record 95,000 bids! 

Total amount applied for? 

$14.2 billion!

I only got half of what I applied for.

Yield at 4.00% p.a. is lower than the 4.19% p.a. from the previous round.

What to do?

Will just have to apply for a larger amount in the next auction in case it gets heavily oversubscribed again.

Somewhat disappointed that the yield isn't higher.

This is on top of being disappointed that I did not get the full amount I applied for. 

Well, it is just too bad that the demand is so strong that a lower yield is acceptable to competitive bidders although I think it is stupid to bid so low.

Won't be surprised some might have put in super low bids like 3% yield to make sure they get full allocation.

Every man for himself, I guess.

Risk free and volatility free T-bills.

Relatively attractive yield (while it lasts.)

In a strong currency like the Singapore Dollar.

What's not to like?

Buying Singapore Treasury Bills (T-bills) is a relatively new activity for me as I was never interested in T-bills in the past due to the very low yields offered.

Things have quite obviously changed and not just for me but, evidently, for many people too.

This first round of auction in November is my 3rd time taking part. 

The first two rounds for me were in October and those 6 months T-bills offered yields of 3.76% p.a. and 4.19% p.a.

My plan is still to divert cash from maturing fixed deposits into T-bills. 

Specifically, 6 months T-bills.

I did not say this before but, to be clear, not all the funds from maturing fixed deposits will be diverted into T-bills.

I used to have many more bank accounts but, in my retirement, for the sake of simplicity, I have reduced the number to only four.

There are different reasons for keeping these four bank accounts active and the others which I found I could do without were closed.

Yes, I can be absolutely ruthless just like what I did with my credit cards, reducing from more than ten cards to just three cards now.

I would like to keep only one credit card but it is good to have another card or two just in case.

Anyway, before I ramble off, back to the topic at hand.

Growing old.

Mind goes wandering a lot more.

I will renew some fixed deposits when they mature at higher interest rates offered by the respective banks for a couple of reasons.

First reason is because I am mental and I would feel poor without seeing some meaningful amount of savings in my bank accounts.

OK, jokes aside, long time readers of my blog might remember that I have an outsized emergency fund as I not only consider my own needs for the next 24 months but also my parents' needs and, to a more limited extent, my siblings' needs.

So, to people who are not in the know, my emergency fund might look excessive but it really isn't.

Well, at least not to my mind.

If you are new to my blog or would like a refresher on my take on an emergency fund, you will find that and more in this collection of blogs:

Survivability and opportunity.

The nice thing about fixed deposits is that I could terminate them pretty easily, get back my principal sum right away with no loss of capital.

Second reason is because I want to maintain my relationship with these four banks as they are useful to me in different ways. 

I do not want to terminate my accounts by shifting all my funds from fixed deposits into T-bills.

It would be too much work for me to rewire things and maybe even reopen accounts when things change again.

We never know what might happen and there is some comfort in familiarity which is OK as long as it isn't harmful.

Yes, old man doesn't like too much change.

So, I suppose I will let the banks make some money because I am such a nice person.

Anyway, more on my plan with T-bills.

I will probably be taking part in T-bill auctions with fresh funds until March 2023 as long as the yields remain relatively high.

This means that with 2 auctions a month, it would be a total of 12 auctions by end of March 2023.

Then, it would just be recycling funds from maturing T-bills into new T-bills from April 2023.

Doing this, together with Singapore Savings Bonds and my CPF savings, the investment grade bond component of my portfolio is going to grow pretty significantly.

Is AK de-risking his investment portfolio?

I don't think so since it is mostly moving money from my bank accounts to bonds. 

Of course, I should also say that if T-bills should see yields plummet due to an overly competitive (and inane) landscape, I could just stay with fixed deposits which are offering increasingly tempting interest rates.

Just as a hedge, I would probably renew a one year fixed deposit with CIMB this month as they are offering 3.8% p.a. for a one year tenor now.

So, am I expecting the next T-bill have a yield of less than 4%?

Well, like I said, it depends on how competitive (and inane) people get.

This development (i.e. larger exposure to T-bills and SSBs) should result in a more resilient investment portfolio and also provide greater certainty in terms of meaningful passive income generation.

We don't know what we don't know but, from time to time, we have more clarity.

Don't throw caution to the wind but we don't want to be overly cautious either.

Stay pragmatic.

Stay invested but be prepared for the possibility that things could get worse.

Cash is not trash and I am talking about the Singapore Dollar, of course.

"We never want to count on the kindness of strangers in order to meet tomorrow's obligations." 

- Warren Buffett

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