Investors move funds elsewhere as yields on S'pore T-bills fall

Options like lower-risk bonds, Reits and stocks could offer better returns: Experts

- Chor Khieng Yuit

Just over two years ago, lab technician Dallas Goh, 34, would put money into Singapore Treasury bills (T-bills) as their yields climbed along with the rate hikes in the United States. He accumulated as much as $100,000 at one point in these short-term government securities.

But with interest rates now set to head lower, T-bills are losing their allure among investors here. Mr Goh, for one, stopped buying T-bills six months ago.

Investors buy T-bills at a discount and receive the full face value upon maturity, which is either six or 12 months later.

Yields on the six-month T-bills hit a peak of 4.4 per cent on Dec 8, 2022, and currently stand at 3.06 per cent, according to the latest fortnightly auction on Oct 10.

For one-year T-bills, the yields rose as high as 3.87 per cent on Jan 26, 2023, before settling at 2.71 per cent in the Oct 17 auction.

Experts told The Straits Times that people who are looking to get more out of their spare cash could consider a range of options, from lower-risk bonds to real estate investment trusts (Reits) and stocks, which may carry higher risk.

Mr Goh opted to park his cash in a money market fund offered by MariBank, the digital banking arm of Singapore e-commerce firm Sea Group, because there was a promotional offer of 5.07 per cent for locking up the money for a month.

Money market funds invest in a mix of cash and cash-like instruments, such as fixed deposits, and short-term fixed-income products like government and corporate bonds.

"The product is higher risk than T-bills, because a portion is invested in corporate bonds," he said, adding that “the additional yield gained over T-bills is worthwhile" for the small risk that he is taking.