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T-bill or DBS, OCBC and UOB? 3.7% or 6% p.a.?

Saturday, September 16, 2023

I received an SMS from CPF that went:

"You have a CPFIS investment deduction from your Ordinary Account."

I suppose this means that my competitive bid (using CPF-OA money) for the last 6 months T-bill auction that took place on 14 September was successful.

A quick check revealed that the cut-off yield was 3.73% p.a. and this is still relatively attractive.

This is relatively attractive when our local banks are offering much lower interest rates for 6 months fixed deposits.

Definitely, it is more attractive than the 2.5% p.a. offered by CPF-OA even when accounting for a loss of 7 months worth of interest income which would have been paid by CPF.

Why 7 months?

This is due to how CPF calculates and pays interest on our CPF savings, taking only the month-end balance into consideration.

So, all three of my applications using cash on hand, SRS and CPF-OA money were successful.

I find it strange that there seems to be less interest in 6 months T-bill now. 

It seems to be weaker compared to a year ago, for example.

I remember non-competitive bids being so plentiful that my offer to buy was only partially filled at times.

Could it be that more people are buying the common stocks of DBS, OCBC and UOB instead, given the higher level of public awareness of how attractive their dividends are?

After all, a 6% dividend yield beats 3.73% p.a. return hands down.

Could AK be doing something wrong?


I can feel an anxiety attack coming.

Time to go sink some enemy warships to calm myself down.

Related post:
Must buy T-bill? 
(How to transfer from CPF-IA to CPF-OA?)


Candy188 said...

Maybe people are rushing to place $$$ in UOB One account for irresistible (up to) 5% p.a. effective interest rate! 🤔🙄🤑

I waited for 1.5 hours (16 customers in queue, luckily I can savor on my teh c kosong in air-conditioned Kopitiam while waiting for my turn)

just to link my UOB One debit card to newly opened UOB One saving account (previously link to Uniplus account) online! 😓

Just found out that I can check the crowd level indicator (serve as a guide though) on the website!🙁

AK71 said...

Hi Candy,

UOB ONE is probably the best savings account for regular folks right now. :)

Simon Lim said...

Dear AK, admire your discipline to buy good stocks and hold on to it.
I do have a SRS account too, over time i have seen it growth, it will be interesting if you can share with your readers how many times your SRS account had growth or the compounded annual growth rate.

AK71 said...

Hi Simon,

I have never bothered to do such calculations.

Too lazy. ;p

I only know that my SRS is growing because of dividends received year after year.

I am also pretty conservative with SRS money and a big chunk of it is in long term endowment policies.

How AK uses his SRS money and why?

Siew Mun said...

Money goes to where it's treated the best.

$127.75 into SRS from T-Bill 3.65%

In Oct:
$757.43 into Cash from OCBC FD 4.08%
$13,110.72 into CPF OA from OCBC FD 3.88%

AK71 said...

Hi Siew Mun,

For CPF-OA money, I only take in the difference between what is being paid and what the CPF-OA would have paid me.

So, for the recent T-bill, using $52K from CPF-OA, I am getting $216.16 more in interest income.

I don't know if you calculate it the same way I do but, in any case, huat ah! :D

Siew Mun said...

I took the gains and not the difference for CPF OA. The difference would be $3,575.31 between 2.5% and 3.88%, not a small change to me. ;-p. These are 'cash' to me as I am above 55 years old. Will be reinvesting the principle and gains in SSBs/T-Billing

Let us make hay while the sun shines.

C said...

small increment but still money.. :-)

AK71 said...

Hi Siew Mun,

That is no small change to me either. ;p

For me, the big one is coming only in January next year as I plonked the bulk of my CPF-OA money in a 1 year T-bill earlier in January this year.

That one had a cut-off yield of 3.87% p.a.

I calculated the difference to be about $6,300.

Can only touch it 3 years from now but I am in no hurry. ;p

AK71 said...

Hi C,

"Interest rates for Special and MediSave accounts (SMAs) of Central Provident Fund (CPF) members will go up by 0.03 percentage point to hit 4.04 per cent a year for the final quarter of 2023, the CPF Board and the Housing Board said in a joint statement on Thursday."

Much better than the increase from 4% to 4.01% :)

At least, now, we can say interest rate went up 1% from 4% p.a. and not a fraction of 1%. ;p

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