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In my last blog post, I made a passing mention about a 6 month T-bill which I bought using money in my CPF-OA maturing in the same week.
I made a request to transfer the money back to my CPF-OA when I saw the funds sitting in my CPF-IA a day later.
It was all rather easy with DBS online banking.
I simply logged in and went to the "Invest" tab and selected "More investment services."
Then, I chose "Refund to CPF Board."
Clicked on "Refund Full Amount", and it was basically done after clicking "Next" and "Submit."
Today, I checked my CPF account and found that the funds are back in my CPF-OA.
Now, I am wondering whether I should buy another 6 months T-bill with the money.
To be quite honest, I am not as enthusiastic as before because the cut-off yield has reduced so much since the start of the year for 6 months T-bills.
In January, it was as high as 4.2% p.a.
The T-bill that matured last week had a cut-off yield of 3.93% p.a.
I am hazarding a guess that the cut-off yield for this week's auction is probably going to be around 3.7% p.a. or similar to what we got in the last auction.
For a sum of $50,000, we are looking at an additional interest income of less than $200 compared to what the CPF-OA would pay for a 7 months period.
Nothing to write home about.
Anyway, with CPF-OA money, I will not go the path of non-competitive bids just in case the unthinkable happens.
I will put in a competitive bid of 3.5% p.a. because I don't think I am interested in anything lower than that.
If the cut-off yield should come in at 3.5% p.a., the difference in interest income is going to be less than $120.
The cut-off yields for 6 months T-bills are declining but the CPF-OA still pays 2.5% p.a.
So, the difference is shrinking and it is really not a big deal.
There is quite a bit of talk in social media that we should all use our CPF-OA money to buy T-bills.
To be honest, unless the sum of money is relatively large, it isn't anything to worry about.
If we do not have a large amount of money sitting in our CPF-OA, we really are not missing out on any meaningful passive income.
I think some people would say don't sweat the small stuff.
Of course, I am just talking to myself.
If AK can talk to himself, so can you!
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18 comments:
Hi AK, there is a typo error on your T-bill BS23117Z. It is 3.69% only
you are right, no point using OA. I just use cash and keep recycling. The coming SSB is 3.16%
Thanks for this!! as you know, I always fail in putting my OA into T bills. with your post, glad I got a easy number to input into my competitive bid!
I was wondering - when do you think it make sense to pull out my SSB and put into the next month SSB? my own number is 0.5% difference since that would be about 50 dollars in a year difference if you put in 10000? that would be worth the time and effort for some clicks!
Hi Isabel,
Aiyoh, all these T-bills codes with too many numbers and letters. I blur.
I checked my blog in March.
T-bills 3.98% p.a.
Maybe, I made made a mistake then too. (TmT)
I blogged about the new SSB recently.
3.16% p.a. SSB...
Hi gagmewithaspoon,
I think 3.5% is a safe bid as it also guards against the possible loss of 8 months in interest income from CPF.
A bid of 3.5% is also being socially responsible as we do not drag down the cut-off yield and harm the interest of other bidders.
So, it is good for ourselves and good for others. AK is a nice person! ;p
As for the SSB, who knows what next month's 10 year average yield is going to be?
Again, I just keep to my simple guideline of only getting SSB if the 10 year average yield is higher than 3% p.a.
Otherwise, I just do VC to my CPF account. ;p
Hi AK, I 'tested' the system. Put in the redemption request yesterday and today, the amount of SSB available for purchase has increased. There's a $2 redemption fee per transaction though, so better to redeem one large sum if going for redemption.
Hi Yv,
Thanks for sharing your experience! :D
This is useful information for anyone who has not made a redemption before. :)
Hi AK, please share your view about using CPF OA for upcoming 1year TBill in Oct. Also, should the competitive bid remains 3.5% for this 1year Tbill or lower?
Thanks!
Hi AmyZ,
A T-bill is a T-bill to me, whether 6 months or 1 year in duration. ;p
If they provide better returns than the CPF-OA, why not?
As for the competitive bid, my thinking does not change and what I said in this blog post holds.
I do what suits me but you have to do what suits you. ;)
Hi AK,
Can I ask what is the description for the Tbill interest when it's paid in the CPF account? I have login to my cpf account but can't find it. Thanks
Hi EX,
With T-bills, we get a "discount" instead of being paid an interest.
So, if we bough $52,000 of the recent T-bill for example, we would see only $51,035 deducted.
At the end of the 6 months period, we will get back the $52,000 minus some service fee imposed by the bank.
Thanks AK!
Morning AK, I have a decent size of CPF OA to consider buying 6-mth T-bills. But I am not sure if I should wait for next tranche (potentially higher yield, maybe 3.78?) or current tranche which should have cut off of 3.75%.. Grateful if you could talk to yourself. Thank you
Hi C,
With T-bill, it is impossible to time the market as we don't know what the cut-off yield is going to be until the auction is over.
However, if we are using CPF-OA money, we have to time our purchase so that we lose 1 extra month of OA interest instead of 2.
So, avoid buying T-bills with auction happening close to the end of the month like this upcoming one.
Buy T-bills which are offered in the first half of each month.
My kid also born in year of pig, hope he as smart as you next time.. :-)
Hi C,
Aiyoh, you like that say AK paiseh lah.
Seriously, pigs are very smart animals but they just pretend to be stupid.
扮豬食虎? ;p
Hi Ak, could you please self talk or point me to previous blog on how to roughly assess the competitive bid to put in for the coming early October 6-month T-bills ? Wonder if I put in around 4 - 4.05% would be prudent as I have a decent size CPF OA to be utilised..thank you.
Hi C,
It is always about how money should go to where it is treated best.
At one time, we could get 3.88% p.a. from OCBC for FD using CPF funds.
So, bidding anything lower than that would be silly.
That is no longer available.
For me, CIMB offers 3.45% p.a. for a 6 months FD.
So, my competitive bid in the last auction was placed at 3.5% p.a.
Anything lower, I might as well place a FD with CIMB.
It is all about being sensible. :)
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