A Secure Investment: T-Bills With Cpf Funds

Treasury bills (T-bills) are short-term, tradable government debt securities that are considered risk-free as they are issued and backed by the Singapore Government. T-bills can be bought using cash, supplementary retirement scheme (SRS) funds, or CPF Investment Scheme (CPFIS) funds. To buy T-bills using CPF, investors need to open a CPF Investment Account with one of the three local banks: DBS, UOB, or OCBC. The process can be done online through the i-banking portals of these banks or via mobile banking apps, although OCBC requires customers to submit an application in person at their branches.

How to apply for T-bills using CPF online

Step 1: Log in to DBS iBanking

Log in to the DBS i-banking portal and select Singapore Government Securities (SGS) under the Investment tab. Select the T-bill option under the "Apply for Singapore Government Securities (SGS)" page and click "Next".

Step 2: Select the Security to Apply

You will see the available issuances in this tab, including the security name and closing date for applications. Select the issuance that you would like to apply for and click "Next".

Step 3: Enter Your Personal and Investment Details

Enter your personal details such as your nationality and the choice of payment method (i.e. cash, SRS, CPF-OA). If you want to invest with your CPF-OA funds, select the relevant option.

You will also need to indicate whether you wish to make a non-competitive or competitive bid. For a non-competitive bid, the yield does not need to be specified, and the applicant is allotted based on the uniform yield determined by the auction.

For a competitive bid, you will need to specify the yield (up to two decimal places). A lower yield is a more competitive bid, but it could mean a lower return than the uniform yield. If the submitted yield is higher than the uniform yield, the T-bill will not be allocated.

Once the bid type is selected, indicate your investment amount, which must be in multiples of $1,000. Note that you will be charged a service fee of $2.70 for each application, regardless of the investment amount.

Step 4: Confirm Your Application Details

Finalise your application details and ensure the payment method, T-bill issuance code, bid type (competitive/non-competitive), and investment amount are correct before submitting your application.

Once done, you will get a confirmation of your application. The appropriate CPF OA funds (less the discount based on the cut-off price) will only be debited after the successful allocation of the T-bills, closer to the issue date.

Additional Information:

Online applications for investing in T-bills using cash or CPF OA funds start at 6 p.m. on the issuance’s date of announcement. Applications made with cash end one business day before the auction date at 9 p.m., and applications made with CPF OA funds end two business days before the auction date at 12 p.m.

There is no transaction charge for online cash applications made through DBS i-banking, while a fee of $2.50 + GST (which works out to $2.70) is required for CPF OA fund applications. There is also a service fee of $2 + GST charged per counter per quarter when using CPF OA funds.

When investing using CPF OA, the issuance date and the maturity date are important factors to consider, as you may lose less CPF interest for 8 months instead of the standard 7 months.

If you no longer want to invest after the T-bill matures, you should transfer the funds back to your CPF OA to avoid losing the CPF interest. There are no charges for this request, and there is no minimum or maximum limit to the transfer amount. However, it will take 3 business days for the fund to be transferred to the CPF OA.

To make the transfer, select the “More Investment Services” option under the Invest tab on the DBS i-banking portal. Then, choose the “Refund to CPF Board” option under the Manage Investments column.

Before You Apply:

Before applying, ensure you have sufficient funds in your account. For applications to new issues funded using cash, the full bid amount will be debited from your account at the point of application.

Applications through ATMs, internet banking, and mobile banking apps may close 1 to 2 business days before the auction, so check with your bank for the exact cut-off time for the different application channels.

Important Note:

When investing with CPF, it is essential to work out the "breakeven" yields of T-bills to ensure that you will not be in a worse-off position. This is because the interest computation of CPF balances is affected by the transactions in your CPF account.

Contributions received this month start earning interest next month, and withdrawals/deductions in this month will not earn interest from this month onwards. Depending on when the deduction is done from your CPF account, you might lose up to 2 months of CPF interest.

Differences between competitive and non-competitive bids

There are two ways to bid for T-bills: competitive and non-competitive bids. The United States Treasury issues T-bills by conducting weekly auctions, selling them at a discounted rate and redeeming them at their face value.

Competitive Bids

Banks, brokerage firms, private investment funds, and other large investors usually submit competitive bids. A comprehensive knowledge of securities markets is required for a successful competitive bid. In a competitive bid, the bidder specifies the amount of T-bills they want to purchase and the return they want on the investment, expressed in terms of the discount rate. For example, a bid of 1.00 means the purchaser seeks a discount rate of one percent.

Non-Competitive Bids

Small investment firms and individuals tend to submit non-competitive bids, also known as tenders. Non-competitive bidders must submit their offers by 12:00 p.m. Eastern Time on the day of the auction. In a non-competitive bid, the bidder does not specify the price or terms of the security. Instead, they rely on competitive bidders to set an average "market" price and offer to purchase a specific amount of T-bills at that price. Non-competitive bids are made by non-institutional investors who accept the market price set by other participants.

Differences

The primary difference between the two types of bids is that competitive bids require a specified amount and return, while non-competitive bids do not. Competitive bids are made by large institutional investors, while non-competitive bids are made by smaller investors. Competitive bids are accepted based on the discount rate, with the lowest bids being accepted first. On the other hand, non-competitive bids are accepted in full, and the discount rate for these bidders is determined by averaging the competitive bids.

Requirements for a CPF investment account

To open a CPF Investment Account, you must meet the following requirements:

• Be at least 18 years old
• Not be an undischarged bankrupt
• Have more than $20,000 in your Ordinary Account (OA)
• Have more than $40,000 in your Special Account (SA)
• Have completed the CPFIS Self-Awareness Questionnaire (SAQ) (for new investors as of 1 October 2018)

You can only have one CPF Investment Account at any given time. To open an account, you will need to contact one of the three CPFIS agent banks: DBS/POSB, OCBC, or UOB.

If you already have a CPF Investment Account with another bank and wish to transfer to DBS, you will need to visit a DBS branch to complete and sign the CPFIS-Inter-Bank Transfer Form and the CPFIA Account Opening Form. The transfer process can take up to two weeks to complete.

It is important to note that you can only invest your OA savings after setting aside $20,000, and your SA savings after setting aside $40,000. Additionally, there are limits on the amount you can invest in stocks and gold: up to 35% of investible savings in stocks and up to 10% in gold.

Before investing with CPFIS, it is essential to consider factors such as your investment goals, investment horizon, risk tolerance, risk-return trade-off, diversification, and investment charges. All investments carry the risk of losing some or all of your money, so it is crucial to understand the risks involved and ensure you have sufficient funds to absorb potential losses.

How to transfer your CPF investment account to another bank

To transfer your CPF investment account to another bank, you will need to visit a branch of your new bank in person to complete the transfer.

Before visiting the bank, ensure that you have the correct account number and that your signature matches the one in the outgoing bank's records. You will also need to complete and sign the following forms:

• CPFIS-Inter-Bank Transfer Form
• CPFIA Account Opening Form
• Standing Instruction Form (if transferring to OCBC)

The timeframe to complete the inter-bank transfer process can take up to 2 weeks, depending on the response time from the outgoing bank.

During the course of the transfer, it is advised that you do not perform any transactions. Once the transfer is complete, you will receive a welcome letter with your new CPF Investment Account number.

How to check if your bid is successful

To check if your bid for T-bills is successful, you can refer to the issuance calendar on the Monetary Authority of Singapore (MAS) website. The results of the auction are usually announced about an hour after the auction closes. The T-bills are then issued 3 business days after the results are announced.

If your bid is successful, the securities will be reflected in your respective accounts after the issuance date. You can check the following statements, depending on the type of application you made:

• For cash applications: Check your Central Depository (CDP) statement
• For Supplementary Retirement Scheme (SRS) applications: Check the statements from your SRS operator
• For CPF Investment Scheme Ordinary Account (CPFIS-OA) applications: Check the CPFIS statement sent by your agent bank
• For CPF Investment Scheme Special Account (CPFIS-SA) applications: Check your CPF statement

If your bid is unsuccessful or invalid, the money will be refunded to the account used to make the application. The refund will be reflected in your account 1 to 2 business days after the auction day.

Frequently asked questions