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Massive disappointment.
Many felt that when the cut-off yield came in at 3.45% for the latest 1 year T-bill auction.
I somehow got the dates messed up and I couldn't take part in the auction.
Regular readers might remember that I bought a 1 year T-bill about a year ago using CPF-OA money.
That cut-off yield was 3.87% p.a. and would mature on 30 January 2024.
So, it would not have matured in time for the recent 1 year T-bill auction.
Somehow, I kept thinking that it would.
Anyway, no loss there.
3.45% p.a.
I would not have gotten the T-bill even if the money came back in time.
I would have placed a competitive bid of 3.5% p.a.
That is minimally acceptable to me when using CPF OA money to buy T-bills.
This is because the breakeven is 3.33% p.a.
This covers the possibility of losing 8 months of CPF OA interest and not just 7 months.
So, at 3.5%, I am only getting 0.17% more than what CPF OA would pay me.
This means that for $100,000, it is a $170 difference.
For $670,000, which is the amount from my last 1 year T-bill with CPF OA money, the difference would have been about $1,140.
Nothing to write home about but still something.
Of course, getting 3.87% the last time, the difference was more significant.
Anything lower than 3.5% p.a., I would just leave the money in the CPF-OA.
Not enough meat for me to be interested.
So, what am I doing with the CPF OA money coming back?
I will try for 6 months T-bill, bidding competitively at 3.5% p.a.
If I don't get it, no big deal.
If AK can talk to himself, so can you.
Reference:
CPF account got hacked!
Bloggy Award
10 comments:
Just do VC with cpf
hi AK,
T bill breakeven for OA is 3.33% for 6M Tbill (assuming 8 months OA interest loss). For 1 year Tbill, it is 2.92% though
Hi AK, like yourself, my T-bills using CPF OA will also be maturing on 30 Jan 2024. The money will return back to the CPFIA account. The last day of the next 6-month T-bill will be on 31 Jan 2024, so I guess we will not be in time to submit a bid for that issuance?
Also, is there a need to transfer the money from CPFIA account back to the CPF OA account before I can submit a bid for the next T-bill?
Hi C wong,
That would give me an average of 3.0% p.a. interest based on my age group.
I have used all the money for VC to CPF to buy SSB instead.
Reference:
CPF or Singapore Savings Bond? It is a no brainer.
Monday, October 3, 2022
and
Update on my plan to save for income. Money I forgot I had. DBS SavvyEndowment11 and 3.92% p.a. guaranteed.
Saturday, April 22, 2023
Hi JD,
Ah, thanks for the reminder.
I got mixed up. -.-"
I would probably try for the next 6 months T-bill after the 1 year T-bill matures on 30 Jan.
So, 3.33% is the number to remember. :)
Hi Robin,
I will take part in the 6 months T-bill auction happening on the 15th with the returning funds.
I will refund the money from the CPF IA to the CPF OA before doing it.
I do not know if this step is necessary but it is just S.O.P. for me, in case I am unsuccessful in my bid for the 6 months T-bill.
"breakeven is 3.33% p.a." - could you explain how do you derive at such number?
Hi CL,
I read an article in The Straits Times which explained the numbers.
As that is behind a paywall, I have found a blog that did the same thing and here is the link:
Earn a potentially higher interest rate on your CPF OA by buying the T-bill. Is it worthwhile?
25 Sep 2022"
We will lose at least one additional month of CPF OA interest payment and sometimes two when we buy T-bills with CPF OA money.
So, the breakeven cut-off yields are 2.92% or 3.33% p.a. for 6 months T-bills and 2.71% or 2.92% for 1 year T-bills, respectively.
Thanks for sharing. I used my CPF statement and work backwards calculation on the interest earned and it worked out close to the yield u mentioned in your blog.
Hi C wong,
Ah, all is well then.
Thanks for letting me know. :)
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