Introduction

SINGAPORE – The allure of Singapore Treasury bills (T-bills) is captivating investors across the board, and it's easy to see why. With yields stabilizing around 3%, these short-term government securities present a solid option for those seeking low-risk returns. In a world where inflation is climbing and economic uncertainty looms, T-bills are proving to be an attractive solution.

Private Investors’ Insights

Private investor Stephen Chen found himself drawn to T-bills after hearing positive feedback from friends back in July 2022. Despite a recent dip in yields prompting him to slow down his investments, he’s committed to keeping T-bills in his portfolio, valuing their security over other options.

Similarly, 57-year-old housewife Michelle Goh has become a convert, securing $19,000 worth of T-bills at a yield of 2.99% during the January 16 auction. With cash from her fixed deposits maturing soon, she plans to reinvest in these low-risk securities.

Historical Yield Trends

T-bills gained prominence in the second half of 2022 when yields began nudging close to 3%. By December 8, 2022, six-month T-bills hit a jaw-dropping three-decade high of 4.4%. This news sent waves through the investor community. While yields have retracted to around 3%, this still outpaces the returns from traditional savings accounts.

Expert Opinions

Experts believe the landscape is set to remain stable. Mr. Wong Di Ming, a research analyst at Bondsupermart, points out that the resiliency of the U.S. labor market and persistent inflation will likely compel the U.S. Federal Reserve to maintain high interest rates. "This environment may keep short-term U.S. Treasury yields unchanged, which means Singapore T-bills will continue to hover around the 3% mark," Wong claims.

The strength of Singapore’s credit—rated triple-A—makes T-bills a foolproof option for risk-averse investors, according to Mr. Kevin Teng, CEO of Wrise Private Singapore. "They provide a compelling alternative to holding cash due to their relatively high yields compared to standard savings accounts," he notes. Furthermore, he emphasizes T-bills' role in diversifying investment portfolios, helping to offset risks associated with more volatile assets.

Investment Alternatives

T-bills are not the only game in town for conservative investors. Mr. Chen highlights alternatives like fixed deposits and money market funds. However, he favors T-bills due to their impressive yields and the added security of government backing. "T-bills are the very safe part of my portfolio. Nothing can go wrong," he assures.

Madam Goh, also an enthusiast, favors non-competitive bids, accepting whatever yield she receives from the auction, which usually surpasses fixed deposit rates. She prefers six-month T-bills over yearly options, reflecting her strategy of keeping cash liquid.

Considering Other Investment Options

For those considering money market funds—mutual funds investing in low-risk, short-duration instruments—there are options like the Fullerton SGD Cash Fund and the Phillip Money Market Fund. However, Chen opts out of these, citing administrative fees charged by fund managers as a drawback. He prefers to manage his investments directly, using matured funds to buy T-bills or exploring higher-yield options such as investment-grade bonds and high-yield debt.

High-yield bonds, while attractive due to their higher interest rates, come with heightened risks since they are issued by companies with lower credit ratings. For more adventurous investors, private credit—loans issued to private firms—can offer even greater returns, albeit with increased risk.

Conclusion

T-bills continue to offer a strategic, low-risk investment solution for those looking to diversify their portfolios in an inflationary economy. As savvy investors like Chen and Goh discover the benefits of these securities, T-bills may increasingly become a staple in the portfolios of Singaporean investors seeking security without sacrificing returns!