IS HERD MENTALITY COSTING YOU MONEY?

Dear readers, the latest auction for Singapore’s 6-month Treasury Bill (T-bill), code BS25114N, concluded on 17 July 2025. The cut-off yield had slipped further to 1.79% per annum, continuing the persistent downward trend in short-term government debt yields in Singapore.

This latest development is significant, especially for conservative investors or cash management seekers who have, over the last two years, looked to the 6-month Singapore T-bill as a dependable and relatively high-yielding option compared to traditional bank deposits. However, this 1.79% figure is now among the lowest yields since the start of 2023, and it has sparked reflection among investors about the decisions made in the past and what to do next.

FROM 3% TO 1.79%: A SHARP FALL IN T-BILL YIELDS

It was not long ago—late 2022 to mid-2023—when Singapore’s 6-month T-bills were yielding 3% or more, with some tranches even hitting above 4% briefly during peak global inflationary fears and aggressive monetary tightening from global central banks. Savers and retail investors rushed into T-bills. Auction bids soared and oversubscriptions were the norm.

But things have clearly changed. A more dovish U.S. Federal Reserve, cooling inflation in Singapore, and lower MAS bill yields have gradually pulled down Singapore T-bill yields. The 1.79% yield on BS25114N is not only a psychological blow to those expecting stable income above 2%, but it also raises questions about whether there are better options out there—or whether we have become victims of herd mentality in chasing ever-declining yields.

WHY I DIDN’T FOLLOW THE HERD BACK THEN

When the T-bills were giving out 3% or more, I was indeed tempted. Who wouldn’t be? A short 6-month commitment with guaranteed government backing and a return far superior to traditional savings accounts seemed like a no-brainer.

But I made a contrarian decision.

Instead of chasing T-bills like the majority, I chose to allocate my funds into the Singapore Savings Bonds (SSBs). At the time, the 10-year average annualised interest rate on select SSB tranches was in the range of 3% to 3.4%, albeit with a lower first-year yield than T-bills. The key advantage for me was flexibility (with monthly redemption), capital security, and most importantly—locking in the higher long-term rates for 10 years.

Today, I feel validated in that decision. While 6-month T-bill buyers now face reinvestment risks with yields below 2%, I continue to hold multiple tranches of SSBs with locked-in average rates above 3% per annum. And yes, I say this not to boast, but to illustrate the importance of resisting short-term fads and considering a longer-term horizon.

WHAT’S BEHIND THE DECLINE IN YIELDS?

To understand the fall in T-bill yields, we must consider the macro environment. Here are several contributing factors:

1. Lower Global Interest Rate Expectations: The U.S. Federal Reserve, European Central Bank, and Bank of England are all either pausing or cutting rates. The Monetary Authority of Singapore (MAS), which uses exchange rate policy rather than interest rates, still sees lower market yields in response.

• Singapore Dollar Strength: A strong SGD has helped suppress imported inflation, which reduces the need for high short-term yields to curb price pressures.

• Excess Liquidity in the System: Institutional funds, corporates, and even retail investors flush with cash have few appealing alternatives, resulting in high demand for T-bills. This drives up prices and pushes down yields.

• Market Confidence in Stability: In uncertain times, investors flee to safety. Singapore’s AAA credit rating and stable macro environment make its government securities a safe haven—again, driving yields lower.

WHAT ARE THE ALTERNATIVES NOW?

With the 6-month T-bill yield at 1.79%, investors are rightly asking: What else is out there?

1. Singapore Savings Bonds (SSBs):
   1. Some recent tranches still offer average 10-year returns above 2.9%, which could beat expected T-bill reinvestment returns if rates stay low.
   1. Perfect for investors seeking optionality with the ability to redeem monthly with no capital loss.

• Money Market Funds (MMFs):
  • Likely still higher than 1.8% per annum interest rates, depending on fund manager performance.
  • However, MMFs are not risk-free. Market fluctuations and management fees can eat into returns, though risks remain low.
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• Fixed Deposits:
  • Promotional fixed deposit rates in Singapore are currently in the range of around 2% p.a. for tenors of 6 to 12 months. Still better than T-bills, but not guaranteed to last.

• Singapore Government Securities (SGS) Bonds:
  • SGS bonds with longer tenors (5-year, 10-year, 30-year) offer higher interest, albeit with market risk if sold before maturity.
  • A good option for CPFIS-OA investors or long-term fixed income allocations.

• CPF Special and Retirement Accounts:
  • For CPF contributors, don’t forget the CPF SA and RA interest rates at 4.08% to 5.08% (as of July 2025). These risk-free returns remain unbeatable in today’s low-rate environment.

HERD MENTALITY: NTT DC REIT – A CAUTIONARY TALE

Beyond the T-bill discussion, I want to bring up another recent example of herd mentality in investing: the listing of NTT Data Centre REIT (NTT DC REIT).

The REIT, backed by Japan’s NTT and supported by Singapore’s GIC, was touted as Singapore’s largest IPO in a decade. With a projected 7.5% yield, the REIT attracted significant investor attention. Many retail investors rushed in, hoping for a strong debut and a new cash cow in the REIT sector.

The excitement was justified to some extent:

• The data centre theme is hot.
• GIC’s endorsement adds credibility.
• The public tranche of the IPO was oversubscribed nearly 10 times.

But what happened?

On its trading debut, NTT DC REIT opened slightly higher, hit an intra-day high just 3% above its IPO price, and closed flat. As of 18 July 2025, the REIT is now trading at USD $0.95, a 5% loss from its IPO offer of USD $1.00.

LESSONS FROM THE NTT DC REIT IPO

This event highlights a few important truths:

1. IPO Excitement Doesn’t Guarantee Success:
   1. Even the biggest, most hyped IPOs can disappoint. A 5% drop after a highly touted listing shows that expectations were probably too high.

• Retail Investors as Exit Liquidity?:
  • Many IPOs serve as an exit strategy for insiders and institutional players. Retail investors often enter without past performance data and find themselves holding the bag when price weakens.

• High Yield ≠ Safe Investment:
  • The projected 7.5% yield sounds attractive. But if unit prices fall or dividends are not fully delivered, the effective yield may not be so appealing.

• Short-Term Mindset is Risky:
  • Some investors only wanted to “flip” the stock on listing day. But IPO investing is not a guaranteed quick-gain strategy, especially in a cautious or declining market.

MY PERSONAL APPROACH: LONG-TERM VALUE OVER SHORT-TERM NOISE

For full transparency, I did not participate in the NTT DC REIT IPO. I rarely, if ever, invest in IPOs.

Why?

• IPOs offer no historical track record for analysis.
• Valuations can be inflated due to hype and FOMO.
• Pre-IPO institutional investors often already made the biggest gains.
• Many IPOs stagnate or decline post-listing after initial excitement fades.

Instead, I prefer to wait, study how the company performs in the public markets, examine its earnings reports, and make more informed, data-backed decisions. This is the opposite of herd mentality—and it has served me well in avoiding many disappointing investments.

THE BIGGER MESSAGE: BE THE MASTER OF YOUR MONEY

So whether it’s chasing T-bill yields that are sliding below 2%, or rushing into oversubscribed IPOs based on headlines, we need to stop and ask ourselves:

• Are we thinking independently?
• Are we assessing our risk tolerance properly?
• Are we making decisions based on fundamentals—or following the crowd?

In investing, the cost of herd mentality is often not immediately visible. It’s the opportunity cost of missing better options. It’s the emotional toll of regret. And it’s the financial loss of poor entry prices, weak yields, or failed short-term bets.

WHAT TO DO NOW?

Here are some tips for investors navigating the current low-yield environment:

1. Diversify: Don’t rely solely on T-bills or fixed deposits. Use a mix of SSBs, MMFs, CPF, and even quality dividend stocks or REITs with stable track records.
2. Plan for Different Time Horizons: Short-term needs (0–1 year) should go to safe, liquid instruments. Long-term savings (5–10 years) can seek slightly higher returns with manageable risks.

• Be Opportunistic, Not Reactive: When yields rise again, have liquidity ready to deploy. Don’t lock up too much in long-term low-yield instruments now if you expect rate changes.

• Think Like an Owner, Not a Gambler: Buy into companies or bonds you’re willing to hold, not flip. Avoid trying to time the market or chase hot IPOs unless you have an edge.

FINAL THOUGHTS

Dear readers, the fall in Singapore’s 6-month T-bill yield to 1.79% is not the end of the world—but it is a wake-up call. Interest rates change. Market sentiment shifts. But the principles of smart investing remain constant:

• Be patient.
• Be informed.
• Be independent.

Let’s not be lured by headlines, short-term hype, or peer pressure. Instead, let’s be masters of our own financial destinies.

After all, it’s your money—and no one should care about it more than you.