Using CPF-OA for 4% T-bills in January 2023.

I applied for both 6 months T-bills this month.

The first one had a cut-off yield of 4.2% p.a.

The second one had its auction today.

Cut-off yield at 4.0% p.a.

My non-competitive bid was fully filled.

I continue to add to the bond component of my portfolio. 

I am using dividends from my investments and also some money from maturing fixed deposits to do so.

Today, I also applied for the 1 year T-bill which, unlike the 6 months T-bills, is only offered 4 times a year.

Source: MAS

The auction results for this month's 1 year T-bill will be announced on 26 January.

Why did I apply for the 1 year T-bill?

I didn't plan to do it but I had to meet my banker at the bank to collect Chinese New Year notes.

It is the usual once a year visit to the bank for me.

Then, I thought I might as well apply for the 1 year T-bill with my CPF-OA money.

I mean I was already at the bank.

Not having to join a long queue at the bank also helped in making the decision to make the application in person easier for me.

As it is costlier and still more troublesome to use CPF-OA money to apply for T-bills, a 1 year T-bill is also more attractive than a 6 months T-bill, everything else being equal, I feel.

I will very likely lose an additional 2 months of CPF-OA interest income but as long as this 1 year T-bill cut-off yield is not too low, I will get some extra pocket money.

Yes, I know, the money can only be in my pocket almost 4 years from now when I turn 55.

This is a reason for accounting for my CPF interest income separately and not lumping it together with my yearly passive income updates.

The interest earned isn't money I can utilize right away.

It isn't near money.

Still, nice to have, I guess.

Moving money from the CPF-OA into T-bills doesn't do anything to my investment portfolio in terms of the bonds to equities ratio, of course.

It just means that my CPF account which I consider part of my bond holdings will get a slight boost.

How much might this boost be?

Well, let us assume I moved $200,000 and the 1 year T-bill cut-off yield was 4% p.a.

Doing a back of the envelope calculation, 1 year CPF-OA interest income would have been $5,000.

4% p.a. 1 year T-bill would yield $8,000.

So, might be grossing $3,000 more.

However, as I probably would not get any interest income from the CPF-OA for an additional 2 months, I would lose another $833 in CPF-OA interest income.

So, the net gain might be closer to $2,166.

For a whole year and with a relatively large sum of $200,000, I don't think the gain is a big deal.

Of course, if we were to move a sum twice or thrice as much, in absolute dollar terms, it might be more interesting.

If I did not have the kind of money I have in my CPF-OA and if I had to join a long queue at the bank, I don't think I would have bothered to make the application.

I know some people are pretty sensitive about this topic.

I hope I did not offend anyone by saying this.

Just me talking to myself, of course.

Anyway, will wait for the auction results now.

Hopefully, my application is fully filled or else the cost would be even higher.

We are not risking a loss of 0.05% p.a. interest but 2.5% p.a. when we use our CPF-OA money.

So, going for competitive bidding makes better sense.

This is in case the unthinkable happens.

The unthinkable?

Imagine a large number of people placed their bids for a 2% p.a. yield and imagine if the cut-off yield was 2.01% p.a.

That would be a most stunning OMG moment!

Just thinking of the possibility is giving me an anxiety attack!

Don't play, play!

Having said this, I put in what I felt was a sensible bid and did not put in an extremely low bid.

I know some people are still waiting for me to say something else.

You want to know what was my bid?

I know.

AK shy lah.

OK, I tell you.

Higher than 3% but lower than 4%. 

Win liao lor!

Good luck to us all!

GONG XI FA CAI!

References:
1. T-bill at 4.2% p.a. investor profile.
2. My largest investments updated.
Recently published:
$1.3m! Average but rich!