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3.75% p.a.
That's the cut-off yield for the latest 6 months T-bill auction.
I said in an earlier blog that a cut-off yield of between 3.65% to 3.85% p.a. would still be relatively attractive.
Plus the fact that the "interest" is paid at the beginning of the tenure, if we are able to hold till maturity, 6 months T-bills offer better returns than 6 months fixed deposits placed with DBS, OCBC or UOB now.
I will go ahead with the plan to apply for the next 6 months T-bill which will have its auction on 26 April when it is available.
That will be the final T-bill I will apply for using fresh funds.
Why?
My T-bill ladder would be completed by then.
This is because the first 6 months T-bill I applied for in October last year will be maturing on the 24th this month.
I will use the returning funds from that maturing T-bill to apply for the first T-bill in May.
Every two weeks from the 24th of this month, I would be recycling returning funds from maturing T-bills.
Therefore, no fresh funds would be required for T-bill applications from then on.
Well, at least that is the plan for now.
As long as the front end of the yield curve stays elevated, this should generate some pocket money for me.
Always nice to have more pocket money.
Since I would not be injecting fresh funds into T-bills, the passive income generated by my investments for the rest of the year will go into my war chest after deductions are made for expenses.
I am in no hurry to increase exposure to equities.
This is largely because I am already substantially invested.
I also don't want to be caught in a situation where Mr. Market goes into a depression and I lack the resources to buy stocks from him on the cheap.
So, do I feel like this because I can see a recession is on the horizon?
Alamak!
If you think like this, you need help.
OK, at least I am not the only one who is mental here.
No, I am simply doing what I have always done.
What might that be?
"Eat crusty bread with ink slowly."
Constructing a T-bill ladder helps to fulfill the "I" in "ink" which stands for "income."
Buying Singapore Savings Bond when the 10 year average yield is above 3% p.a. really helps to fulfill the "c" in "crusty" which stands for "CPF."
The "w" in "with" stands for "war chest" and I need to fill up mine.
If you are new to my blog and feel a little lost with my taste in food, I will hyperlink the relevant blog post below.
I think it is quite tasty.
If AK can do it, so can you!
Updated on 14 April 23 with a new video on the latest from MAS:Recently published:
Lean F.I.R.E. since 2014!
Reference:
Eat crusty bread with ink slowly.
Related post:
Saving for income.
Bloggy Award
12 comments:
Hi
You must have a crystal ball or something. I fell off the Tbill ladder today as I got greedy and put in a bid just above 3.85%.
Hi Yv,
I only have a bowling ball that thinks it is a crystal ball. ;p
The last two auctions had cut-off yields of 3.65% and 3.85%.
Looking at the prevailing yields, I didn't see much movement.
In case you are wondering, I check the daily yields here:
https://eservices.mas.gov.sg/Statistics/fdanet/TreasuryBillOriginalMaturities.aspx?type=BY
Anyway, I thought it was reasonable to assume that the cut-off yield for the latest auction would be somewhere between 3.65% and 3.85%.
If it had come in higher than 3.85%, it would be have been a bonus.
I just went with a non competitive bid. :)
Hi,
No interest in the BY23101W 1-Year T-bill?
I'm popping off a few $$$ at it. My six month "ladder" is complete and starting to rotate.
I am currently being very cautious until there is some clarity over the Ukraine war and the very aggressive stance the US is taking on China.
Richard.
Hi Richard,
Like you, my T-bill ladder is constructed using 6 months T-bills.
The quarterly 1 year T-bill will mess up the ladder and cause my OCD to go into overdrive. ;p
I did use a substantial part of my CPF-OA money for 1 year T-bill though.
See:
CPF-OA in T-bill university.
I agree with you that geopolitics is very volatile right now.
This is a good reason for having a more robust war chest.
Being substantially invested in equities already, I am more likely to regret not having resources in a bear market than not having invested more to benefit from a bull market, if it should happen.
The Monetary Authority of Singapore is worried about the economy, we should be worried too.
Latest news:
Prepare for a possible recession.
Happy to see more people joined me in bond investing since last year. When I started in 2014, the yield was miserable, 2%+ kind. Buy and forget. I built my ladder from 1Y TB to 10 SGS. Quite heavy on the 5Y and 10Y SGS. Just prefer a consistent and predictable longer term passive income. Too lazy to keep renewing every 6M. When the yield curve is normal, it's good.
But since last year, the curve has inverted, and I joined you in playing the 6M ones but in small amount to earn some kopi money. Lol.
Hi Henry,
To F.I.R.E. on a yield of 2% p.a. is not easy for most people because it would require quite a bit more capital.
You crouching tiger, hidden dragon! ;)
Yes, I also think of the money I get from the 6 months T-bill as kopi money. LOL.
Well, I don't drink coffee.
So, the money just stays in my pocket and, hence, the phrase "pocket money" is more appropriate for me. ;p
Hi AK
I realized that I had created confusion.
The bond portfolio is not big. I can live on a less than $2K monthly expense because of personal situation. Kids grown up, wife still working, live in a fully paid HDB, no car, no loans. I have some equities/reits that pays decent dividend, draw out from insurances bought 3 decades ago and is able to withdraw excess from CPF. Combining them, it's sufficient to meet a Lean lifestyle. Hope this clarify the tiger amd dragon thing. Lol.
Hi Henry,
You on F.I.R.E. but your wife is still working?
You have a very understanding wife! So lucky! :)
It reminds me of a reader who got scolded by his wife because he wanted F.I.R.E.
I will be releasing a YouTube video on this topic tomorrow too. ;p
Thank you so much for clarifying although I still think you are crouching tiger, hidden dragon. ;)
Alamak. Don't keep poking uncle lah. She love her job and don't want to FIRE yet, what can I do? Lol. Still talking about tiger and dragon. Bye. Hahaha.
Hi Henry,
OK, I will let sleeping tigers and dragons lie.
I shouldn't wake up sleeping tigers and dragons and make them angry. ;p
Lol.
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