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

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?

OMG!

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?)

How to transfer from CPF-IA to CPF-OA? Must buy T-bill?

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!