GO FOR SIX-MONTH T-BILLS OR ONE-YEAR T-BILL?
The latest six-month T-bill came in with a cut-off yield of 3.74 per cent, which is higher than the cutoff yield of 3.58 per cent for the one-year T-bill.
Six-month T-bill yields were falling at the start of the year but rose again, probably as expectations for a rate cut earlier in the year had eased.
Providend chief executive and founder Christopher Tan says: "Currently, the long-term yield is still lower than the short-term yield as the Fed has been raising short-term interest rates to fight inflation and in the meeting on May 1, they held the rates steady."
The reinvestment risk is that if the Fed decides to lower shortterm interest rates in the next six months, investors may not be able to reinvest the money in a T-bill at a similar or better yield.
Mr Tan says: "As such, if you have cash that you do not need to use in the next 12 months, you may want to consider investing in one year T-bills to lock in the current yield."
CHOICE OF FIXED DEPOSITS, SSBS AND T-BILLS
He suggests: "Spread the cash needed in the next five years using all three instruments: Fixed deposits, Singapore Savings Bonds (SSBS), as well as T-bills." • Cash needed for immediate drawdown can be in a savings account.
• Cash needed in the next six to 12 months can be placed in T-bills • Cash can also be placed in SSBS to lock in the yield, in case it drops.
Finally, another instrument to consider if investors need to park cash for the short term can be a short maturity single premium endowment. This is usually between one and three years in maturity.
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Esta historia es de la edición May 05, 2024 de The Straits Times.
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