Invest 101, Life Stages / Personal Finance

T-Bills vs SSB vs Fixed Deposits vs Cash Management Accounts: What Is The Best Way To Invest Your Cash Savings

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On Wednesday, 19 September 2024, the US Federal Reserve (Fed) slashed interest rates – marking an aggressive start to its first easing in over 4.5 years.

Before this much-anticipated rate cut, the Fed had been raising interest rates at an unprecedented pace – from 0-0.25% to 5.25-5.5% between March 2022 and July 2023.

For retail investors, this means it may get more challenging to earn an attractive interest rate on our cash savings, especially as more rate cuts look to be on the horizon.

In general, Singapore investors can put their cash savings in Treasury Bills (T-bills), Singapore Savings Bonds (SSB), Fixed Deposits (FD) or Cash Management Account to earn an attractive interest rate, while still maintaining a very high degree of liquidity.

#1 Treasury Bills (T-bills)

Treasury Bills or T-bills are the shortest-term Government securities. In Singapore, we can invest in either the 6-month T-bills (issued every two weeks) or the 1-year T-bills (issued each quarter).

Singapore T-bills are issued in denominations of $1,000, so retail investors can easily buy them, alongside institutional investors. As there is a fixed amount of T-bills allotted during each launch, there is no guarantee that investors will be given the amount of T-bills they have applied for, especially during launches when there is a surge of investor interest (pun intended!). You can see this with the % of non-competitive applications allotted in the table below.

Non-competitive applications are those who apply for T-bills without putting any threshold for interest rates they expect to receive (i.e. they accept the market rate). Putting in a competitive application means you insert an interest rate that you want to earn, otherwise, and if that target interest rate is not hit, you will not be allocated any T-bills.

Read Also: Singapore Treasury Bills (T-bills): What Is Cut-Off Yield, Median Yield, And Average Yield

For those interested in investing in 6-month T-bills, the next issue will be on 26 September 2024:

Application Period
Tenure
Total Amount Offered
% of Non-Competitive Applications Allotted
Interest Rate (Cut-Off Yield)

11 Jul to 18 Jul 2024
23 Jul 2024 to 21 Jan 2025
S$6.8 billion
82%
3.64%

25 Jul to 1 Aug 2024
6 Aug 2024 to 4 Feb 2025
S$6.8 billion
100%
3.4%

7 Aug to 15 Aug 2024
20 Aug 2024 to 18 Feb 2025
S$6.8 billion
100%
3.4%

22 Aug to 29 Aug 2024
3 Sep 2024 to 4 Mar 2025
S$6.8 billion
100%
3.13%

5 Sep to 12 Sep 2024
17 Sep 2024 to 18 Mar 2025
S$6.9 billion
100%
3.1%

19 Sep to 26 Sep 2024
1 Oct 2024 to 1 Apr 2025
 
 
 

3 Oct to 10 Oct 2024
15 Oct 2024 to 15 Apr 2025
 
 
 

17 Oct to 24 Oct 2024
29 Oct 2024 to 29 Apr 2024
 
 
 

30 Oct to 7 Nov 2024
12 Nov 2024 to 13 May 2025
 
 
 

14 Nov to 21 Nov 2024
26 Nov 2024 to 27 May 2025
 
 
 

28 Nov to 5 Dec 2024
10 Dec 2024 to 10 Jun 2025
 
 
 

12 Dec to 19 Dec 2024
24 Dec 2024 to 24 Jun 2025
 
 
 

You can also see in the table above that interest rates have been falling in the past few T-bill launches – as many market watchers had already pre-empted a rate cut in 2H 2024. The empty entries represent future data.

Interestingly, we can also see that the past few 6-month T-bill launches had a 100% allocation to non-competitive bids. This tells us that the cut-off interest rates were potentially lower than what many were hoping to get when submitting their competitive bids.

Going forward, we can expect interest rates on future launches to potentially drop further – until the current rate cut cycle stabilises.

Read Also: Treasury Bills (T-bills): What Are They And How You Can Buy Them

#2 Singapore Savings Bonds (SSB)

First issued in 2015, Singapore Savings Bonds or SSBs for short are another type of Singapore Government Securities (SGS). SSBs offer individual investors, both Singaporeans and foreigners, a way to build their long-term savings.

SSBs are launched every month, and individuals can invest in SSBs in multiples of $500 up to an investment limit of $200,000. SSBs have a maximum tenure of 10 years, paying a step-up interest rate for each year that you continue to hold on to the SSB. Alternatively, you can choose to withdraw your SSB at any time, also in multiples of $500.

The latest October SSB issue will offer an average interest return of 2.77% over its 10-year tenure. In the first year, we will receive 2.59% and this will gradually rise to 2.97% by the 10th year.

The average interest rates for new SSB launches have also been on a downward trend:

SSB Launch (2024)
1st-Year Interest
Average 10-Year Interest
Amount Offered
Amount Applied

January
3.0%
3.07%
$1.1 billion
$867.5 million

February
2.72%
2.81%
$900 million
$182.8 million

March
2.74%
2.88%
$800 million
$123.5 million

April
2.95%
3.04%
$900 million
$301.3 million

May
2.99%
3.06%
$900 million
$301.0 million

June
3.26%
3.33%
$1 billion
$1.6 billion

July
3.26%
3.3%
$1.1 billion
$1.3 billion

August
3.19%
3.22%
$1 billion
$969.0 million

September
3.06%
3.1%
$900 million
$829.4million

October
2.59%
2.77%
$800 million
 

November
 
 
 
 

December
 
 
 
 

As we can see in the table below, the interest rates for the SSB in October 2024 are the lowest it has been in 2024 – again, likely in anticipation of the interest rate cuts.

We can also see that the interest in SSBs was relatively weak in the early part of the year. For example, from February to May 2024, only a fraction of the total amount offered was applied for.

However, interest spiked in June 2024, with $1.6 billion worth of SSB application – while the amount offered was only $1 billion. Since then, demand has stayed relatively strong as well. This is again likely a result of the anticipated interest rate cuts, and investors may have wanted an option to lock in higher interest rates over the 10-year tenure.

Read Also: Complete Guide To Buying Singapore Savings Bonds (SSB) [2024 Edition]

#3 Bank Fixed Deposits (FD)

Fixed deposits also offer an investment for Singapore investors to lock in the interest rates that they can earn over several months and up to a few years.

Unlike T-bills and SSBs, fixed deposits are not guaranteed by the Singapore Government. Nevertheless, fixed deposits are covered by SDIC or the Singapore Deposit Insurance Company for up to $100,000 per bank per person.

Interestingly, the interest rate for fixed deposits, especially for higher amounts, is 0.05% for all three banks.

Fixed Deposits (FD)
12-Month FD Board Rate For Above $20,000
Most Attractive Interest Rate

DBS
0.05%
Board Rate: 3.2% for 12-month FD

OCBC
0.1%
Promotional Rate: 2.9% for 6-month FD applied online

UOB
1.5%
Promotional Rate: 2.7% for 6-month FD

As we can see in the table above, fixed deposits do offer an interest rate that is close to what the Singapore Government Securities are paying.

Read Also: Beginners’ Guide To Best Fixed Deposits In Singapore

#4 Cash Management Account

Cash management accounts are typically offered by digital brokerages and platforms, enabling retail investors to access money market funds and short-term bonds to earn a higher interest return on their cash.

Such investments typically carry a slightly higher risk compared to Government T-bills and SSB, as well as fixed deposits offered by banks. Another thing to note is that cash management accounts are not uniform – which means different cash management accounts can be exposed to different financial products and carry varying levels of risk. Even an individual platform can also offer multiple cash management accounts exposed to different funds.

The interest rate paid by cash management accounts may also fluctuate with market movements. Whereas, for T-bills, SSBs and fixed deposits, our interest return is fixed over a period of time.

There are currently at least 10 cash management accounts in Singapore that we can invest in. You can read out article on cash management accounts to get a more comprehensive guide to the topic, as well as the interest rates that they provide.

What we can be assured though, is that cash management accounts should pay an interest rate that is relatively competitive. This is because they are exposed to market movements.

Read Also: Complete Guide To Cash Management Accounts In Singapore [2024 Edition]

There are pros and cons, as well as different characteristics, that we have to consider when we want to invest our cash in the short-term.

If we have a longer horizon, we can and should also consider allocations to stocks and bonds to earn a better return. Having a longer horizon means we can ride our short-term market fluctuations to benefit from longer-term returns – which have historically been closer to 6% to 8% per annum.

Read Also: Guide To Understanding Syfe’s Downside Protected Portfolio S&P 500 Investment

The post T-Bills vs SSB vs Fixed Deposits vs Cash Management Accounts: What Is The Best Way To Invest Your Cash Savings appeared first on DollarsAndSense.sg.