Dear readers, the latest 6-month Treasury Bill (T-Bill), BS23111W closed on 8 Jun 23 and the cut-off yield for the T-Bill is still decent, at 3.84% per annum.
The higher return for T-Bill is not unexpected since the tenure of the T-Bill is comparatively shorter than for Fixed Deposit or Bonds.
The high interest rates since last year has moderated, as we noted from the declining annual returns of T-Bills, Fixed Deposits and even Money Market Funds. For example, the Jul 2023 Singapore Savings Bonds has an annual 10-year return of 2.82%, down from some 3+% per annum in previous tranches.
While annual interest rates are the highest among other savings instruments, T-Bills’ tenure is only 6 months to 1 year; investors seeking to grow their monies over the long term should have another strategy given that it is inevitable that the current T-bill interest rates will not be sustainable.
That is why I would think T-Bills may be a distraction for some as the higher yields on the back of the current high interest environment, may keep luring investors again and again into T-Bills for short-term yields. It’s a distraction from investors’ longer-term strategy of wealth creation, when interest rates cannot be always high.
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