T-bill's 3.87% p.a. cut-off yield and only 79% allotted.

After the 4.07% p.a. cut-off yield in the prior T-bill auction, I was looking forward to a possibly higher cut-off yield for this auction.

Unfortunately, the possibility of a much higher cut-off yield attracted many low-ballers, and that crushed all hopes of a higher yield.

If we look at the average yield for this auction and the auction that took place on 28 Sep, it is quite clear what happened.

This auction's average yield is 3.37% p.a.

28 Sep's average yield was 3.51% p.a.

There were people bidding much lower than 3.37% p.a. to secure the T-bills in this auction.

As low as 2.37% p.a.

That is just asinine.

That is even lower than what the CPF-OA pays!

The amount of interest in this auction shot through the roof as only 79% of non-competitive bids were allotted.

I hope the low-ballers are happy now that everyone ends up with a lower cut-off yield.

Reference:
4.07% p.a. T-bill.

Increasing bond exposure on higher yields.

In my last blog post, I shared how much passive income I received in the first 9 months of 2023.

My investment portfolio is still bringing home the bacon.

However, there is more variety to the bacon now.

Why do I say this?

Over the years, I have been very consistent in saying that I want to maintain a meaningful percentage of investment grade bond in my portfolio.

For a long time, I said that I treat my CPF savings as the investment grade bond component of my portfolio.

Risk free and volatility free, there really isn't a better option for a person like me.

I have a blog post titled "Unless we are very rich, CPF is all we need" to share my perspective on the matter.

This is the link to that blog post: HERE.

Of course, I share my CPF numbers at the start of every year, showing how much interest income is paid to me.

This interest income is not included in my quarterly passive income update.

Why?

The CPF interest generated is not immediately available for withdrawal to be used in any way we like.

We will be allowed to withdraw any CPF savings in excess of the Full Retirement Sum and the Basic Healthcare Sum when we turn 55 and not earlier.

My quarterly passive income report has always been about income generated by my investments in the stock market.

This year, however, my investment portfolio also includes bonds.

In the last one year or so, with bond yields much higher, I have also been buying Singapore Savings Bonds and T-bills.

So, my quarterly passive income report this year has another flavor.

A sprinkling of fixed income.

With bonds being much more rewarding now than 1 year ago, I am going to continue strengthening my T-bill ladder and, hence, enlarge the bond component of my portfolio.

I am a lazy fellow and would always go for low hanging fruits first.

Taking advantage of the CPF-SA and the CPF-MA was an easy decision so many years ago.

Taking advantage of the higher bond yields now is another easy decision for me.

To be sure, the coupons received from bonds will not make an earth shattering difference to me even as they nudge my quarterly passive income a little higher.

However, if we focus on this difference, we are missing the point.

What's the point then?

This is risk free and volatility free.

There is assurance that we will get paid during good and bad times.

This is very comforting to me.

Having such a component in my investment portfolio helps to smooth out rough patches which are bound to appear from time to time.

All else being equal, I will continue to increase exposure to this asset class in 2024.

If AK can do it, so can you!