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T-bills with CPF and SRS in March 2023.

Sunday, February 26, 2023

So far, I have applied for T-bills mostly with cash, using mostly money from maturing fixed deposits.

As more and more money got locked up in T-bills as well as fresh fixed deposits with higher interest rates, I  reached a stage where I didn't have anymore cash to apply for T-bills.

Then, I found some money playing truant at home which I quickly put to work in T-bills in February.

Unfortunately, unless I had a money tree at home, it would be impossible to find more money playing truant at home.

I still want to continue getting T-bills in order to maintain a meaningful exposure to fixed income especially during this period of much higher yields.

Of course, until a few months ago, for many years, even as a retiree, I was doing voluntary contributions and top-ups to my CPF account to achieve this goal.

I have always thought of the CPF as an investment grade government bond which offered relatively attractive yields while having an annuity angle.

So, although it might seem like I have recently developed a fascination for fixed income, I really haven't.

It has always been an important part of my investment portfolio.




Anyway, I looked at how much money I might have left in my SRS account and CPF-OA as we can buy T-bills using money in these accounts.

My SRS account recently got a leg up as I sold my investment in SATS, booking a modest capital gain in the process.

My CPF-OA still has some $52K available for professionally managed products.

I will split the $18K available in my SRS account into 3 equal parts and apply for the 3 T-bills on offer in the month of March.

These would be non-competitive bids as I suspect that the cut-off yields for all the T-bills to be auctioned in the month of March would be much better than the SRS interest rate.

This is one prediction my bowling ball which thinks it is a magical crystal ball is going to get right, I feel.

Yes, I said to my bowling ball, "You win liao lor!"




The $52K available for investment in my CPF-OA, I will make a competitive bid for the T-bill closing on 1 March.

I am bidding very close to a 4% p.a. yield this round as I see inflation data coming in strong and also a strengthening US$ against the S$.

As the application is being made online, the cost really isn't that high like before.

Online application saves me a trip to the bank and, quite possibly, a long time in a queue.

It is very fortunate that DBS has made online application for T-bills using CPF-OA money available.

If successful, I would lose only an extra month's worth of interest income (i.e. for the month of March) from CPF-OA as the T-bill will mature in early September. 

This would give me ample time in the month of September to transfer the money from the CPF-IA back to the CPF-OA so that I would not lose another month's worth of interest income for the month of October.

In total, I would lose 7 months' worth of CPF-OA interest from March to September.




This is unlike the 1 year T-bill which I applied for in January using CPF-OA money.

For that T-bill auction, my bid yield was just a bit more than 3.4% p.a. as that was the interest rate OCBC offered for fixed deposits placed using CPF-OA money.

The cut-off yield for that T-bill was 3.87% p.a. which wasn't a bad outcome.

That 1 year T-bill started at the end of January 2023 and matures at the end of January 2024.

So, for that T-bill, unfortunately, I would lose 2 more months' of CPF-OA interest income for the months of January 2023 and February 2024.

Total of 14 months of CPF-OA interest income lost.

Just talking to myself about T-bills.

If you are new to eavesdropping on AK, please do not jump to the conclusion that this is all that we have to do to achieve a significant level of financial security and, ultimately, financial freedom.

For the vast majority of us, fixed income alone is not going to get us to financial freedom.





References:

1. CPF or SSB?
2. Have $10K? Invest or save?
3. Changes to portfolio (Feb 23.)

28 comments:

C said...

Good morning AK, regarding your self talk-
" The $52K available for investment in my CPF-OA, I will make a competitive bid for the T-bill closing on 1 March." and this "

My questions-

1) currently OCBC FD offers 3.88% using CPF OA ,

2) Using CPF OA to purchase T- bills, does it matter if 6 months or 1 year? My simple mind tells me the longer my CPF money stays outside, the greater the opportunity costs. So if I apply by DBS online by 1st March , based on OCBC FD above, I may just apply for 6-mth T bills using my CPF money at 3.95% on competitive bid basis, don't know if this is too ambitious. Therefore giving up 1 month of CPF OA interest upon redeem in September..

3) or just keep it simple by applying for OCBC FD at 3.88% for 8 months tenure using CPF?

Thank you:)

Yv said...

Hi AK,

Thanks for talking out loud about your March plans. I am still waiting for the cows to come home for OCBC (my agent bank) to upgrade their system to allow for CPF investment via internet banking.

I signed up for DividendMachines on Friday evening and am halfway through the online modules. Attended the 5h long webinar training yesterday and it was quite useful for newbie stocks/REITS investors like me. They shared about their DividendMachinePro program and I am still wondering if it may be too overwhelming for a newbie like me.

ts said...

Hi AK,

Thanks for sharing. I have one question regarding T-bill application using CPF-OA.

1. The aution for the coming T-Bill closes on 1-Mar. That means my application will have to be submitted 28-Feb? Wouldn't that mean that 3 months of CPF interest is lost (Feb, Mar and Sep)?

1. If I submit competitive bid and am not successful, does that mean that I will "white-white" lose my CPF-OA interest for 2 months (Feb and Mar) .

regards,

TS

AK71 said...

Hi C,

Well, you know lazy AK likes to keep things simple.

Being lazy, I also want to avoid having to make a trip to the bank if I can.

To be honest, if I can place my CPF-OA money with OCBC for a 3.88% p.a. interest rate for 8 months without having to make a trip to the bank, I would do that in a heartbeat!

Since that is not an option, I decided to tikam T-bill instead.

I feel that a bid yield of 3.95% p.a. isn't too ambitious but I could be bias since my own bid yield is around there too. ;p

However, if you are using CPF-OA funds, you must send in your application latest on 28 Feb, if I am not mistaken.

Funds from CPF-OA will only be deducted if your bid is successful.

So, you won't lose out on CPF-OA interest income in February. :)

AK71 said...

Hi Yv,

Yes, it is such a hassle having to visit the banks. -.-"

I am glad you have found Dividend Machines to be helpful.

It is the only investment course I promote year after year since its inception.

If it is not good, AK won't promote.

There has not been any other paid collaboration here in my blog for many years already. :)

As for signing up for additional services, it is like buying insurance riders.

You already have the insurance which does the job but the riders help to lighten your burden a little more.

It is good that you are thinking about the offer and did not sign up right away. :)

AK71 said...

Hi TS,

For the upcoming T-bill auction, if you are using your CPF-OA money, yes, you must submit the application latest by 28 Feb and, to be kiasu, do it in the morning.

Money from your CPF-OA will only be deducted if your bid is successful.

If you are unsuccessful, your CPF-OA is not touched and you won't lose anything.

If you are successful, funds will be deducted in March which means you will lose CPF-OA interest for the month of March.

The funds, in this case, comes back in early September when the T-bill matures which gives you enough time to transfer the funds back into your CPF-OA from your CPF-IA.

So, you would not be losing interest income for September.

I explained this in detail in the blog above and you might want to read it again. ;)

Unknown said...

Wouldn't you be losing interest for September too as CPF interest is calculated monthly on the lowest balance for that month?

ts said...

Hi AK,

I am actually quite confused because of what I found when googling. Hope I am not irritating you.

I found this on cpf website: https://www.cpf.gov.sg/member/faq/growing-your-savings/cpf-interest-rates/how-is-my-cpf-interest-computed-and-credited-into-my-accounts

It says that funds received this month will start earning interest next month. Does that mean that if you transfer back the amount in Sep, there will be no interest until Oct?

I also saw this from DBS website https://www.dbs.com.sg/personal/support/investment-sgs-apply.html under Timeline of Events: Funds will be debited from your bank account at the point of application. But I am not sure if it applies to CPF-IA.

Thanks.

TS

AK71 said...

Hi Unknown,

Alamak. You are right, of course.

I blame it on the drugs I am on. -.-"

We will lose CPF-OA interest for 7 months from March to September.

Thanks for the correction! :D

AK71 said...

Hi TS,

Oh, don't worry.

Not irritated at all.

Only too happy to have questions which helps me to clarify stuff too. :)

As pointed out by Unknown in the comment before yours, we will lose interest in the month of September too which is correct.

So, we will lose 7 months of CPF-OA interest.

Siew Mun said...

I finally use $510,000 from CPF OA to deposit OCBC FD 3.88% - 8 months tenure. My CPFIA is DBS. I did it on 15 Feb with 9 people ahead of me. The time taken to wait and complete the transaction was about 15 minutes on a rainy morning. $510,002.70 was deducted from my CPF OA on 16th Feb, $2.70 being the service charge. I reckon I get $3,575 more than what CPF OA interest at 2.5% including a 1 month lost in CPF interest.
I favour OCBC FD over 6 months T-Bill because I can auto roll over the FD with interest compounded if the renew FD interest rate is good.
Also the 1 month loss of CPF interest can be stretched over more months. I will lose less for the 1 month CPF interest:
For example:
Lose 1 mth CPF interest for 8 months
If I roll over another 8 months FD, I lose 1 month for 16 months FD
For 6 months T-Bill, I lose 1 month for every six months. there is no auto roll over. If I buy 6 months T-Bills again after maturity I will lose another 1 month of CPF interest.

AK71 said...

Hi Siew Mun,

Thank you for sharing your experience with OCBC's CPF-OA FD offer. :D

I like the way you think!

Food for thought for the rest of us, for sure.

I hope that when OCBC does the auto roll, they give you the promotional interest rate as well because my experience with all three local lenders with regards to FD auto renewal has not been good.

They required me to visit the bank to do the renewal if I wished to enjoy the prevailing promotional rates.

C said...

Thank you AK :)

Siew Mun said...

You can renew online. No need to go to the branch. From OCBC Time Deposit FAQ
https://www.ocbc.com/personal-banking/deposits/fixed-deposit-account?qualtric=faq

Can I renew my Time Deposit upon maturity and at prevailing promotional rates ?

You may renew your existing Time Deposit at the prevailing promotional rates if your Time Deposit is maturing in the next 5 days. Simply visit any OCBC branches or complete this online form https://internet.ocbc.com/internet-banking/Login/Login?rp=%2finternet-banking%2fOnlineForm%2fForm%3fFormId%3dtdform%26redir%3d1

AK71 said...

Hi C,

Welcome. :D

Just talking to myself as usual. ;p

AK71 said...

Hi Siew Mun,

Wow! That is a big improvement.

Thanks for letting me know! :D

One reason why I like CIMB FDs so much is because they auto renew my FDs at the prevailing promotional rates all the time.

I don't have to do anything at all.

Still, filling up a form online is a lot more convenient than having to pay a visit to the bank. :)

EX said...

Hi AK, it's my first time using OA to invest so wanna be extra careful. For those of us who are using OA to finance our home loan, can we go ALL IN to move the funds into TBills in batches? This won't affect the monthly payment for the loan right? Thanks

EX said...

Hi AK, it's my first time using OA to invest so wanna be extra careful. For those of us who are using OA to finance our home loan, can we go ALL IN to move the funds into TBills in batches? This won't affect the monthly payment for the loan right? Thanks

AK71 said...

Hi EX,

We are not allowed to go ALL IN with CPF-OA funds as we are required to retain a minimum of $20K in the CPF-OA.

So, not to worry. :)

Of course, we have to ensure we have enough in our CPF-OA to pay the monthly mortgage if we have one.

So, only deploy excess funds to T-bills from the CPF-OA which will not be needed for the next 6 to 12 months.

Yv said...

Thanks Siew Mun, AK for sharing.

I happened to be back for the weekend and I went down to OCBC main branch yesterday morning to do the CPF to SGS thing. It was a 2h wait to see the personal banker and when it was my turn, he told me the application had closed at 11am and offered me the FD instead.

AK71 said...

Hi Yv,

Alamak! Why OCBC so like that? -.-"

You went early in the morning and they made you wait for 2 hours until past 11am.

It is their fault, not yours.

To be fair, their FD offer for CPF-OA money is not bad.

However, you want to do it at the start of the month and not at the end to prevent the possible loss of 2 additional months' of CPF-OA interest income instead of only 1.

Yv said...

Alamak :( I took up the FD offer yesterday as I was flying back overseas today and won't be back till end of March.

Thanks, AK, for your advice though, will bear that in mind in future

AK71 said...

Hi Yv,

Ah, hopefully, they did not deduct the funds from your CPF-OA today.

If they deduct the funds from your CPF-OA tomorrow on 1 March, then, you would not lose the interest income from CPF for the month of February.

Crossing fingers. :)

Siew Mun said...


AK, Yv
OCBC change their FD offer. The CPF 8 months - 3.88% offer ended. Now is 5 months 3.55%. OCBC will probably deduct from CPF on 1 or 2 Mar
https://www.ocbc.com/personal-banking/deposits/fixed-deposit-account

AK71 said...

Hi Siew Mun,

Ah, 5 months FD with CPF-OA and at 3.55% p.a. sounds less attractive than a 6 months T-bill.

A pity they ended the 8 months 3.88% p.a. promo.

However, that is good news for Yv as he locked in the old promo! :D

Good news for Yv too that they will deduct the funds from his CPF-OA on 1 or 2 March. :D

Wow! You wake up earlier than me! ;p

Yv said...

Hi HK, Siew Mun

Wow! At least I managed to lock in the 3.88% old rate but funds was already deducted from CPF yesterday on 28th. Can't have my cake and eat it too.

Placed a competitive bid for the SGS tbills with some cash bonus that I just received yesterday too.

AK71 said...

Hi Yv,

What a coincidence that you said "Hi HK."

I say this because I am working on a new YouTube video on HK vs SG. ;p

3.88% p.a. huat ah! T-bills huat ah! :D

AK71 said...

OCBC and UOB customers can tap CPF funds to buy T-bills online from 31 March and 22 April respectively.

Source: The Business Times, 10 March 2023.


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