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Old 21-05-2020, 05:50 PM   #1
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Tbill question

Say it's 1.8% interest for 12 months.
I buy in $10000 all accepted.

Is it I will pay $10000-1.8%.
So I pay $9820 upfront
12 months later get $10000

Or
I pay $10000
12 months later receive $10180?
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Old 21-05-2020, 06:10 PM   #2
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Say it's 1.8% interest for 12 months.
I buy in $10000 all accepted.

Is it I will pay $10000-1.8%.
So I pay $9820 upfront
12 months later get $10000

Or
I pay $10000
12 months later receive $10180?
Guessing its the former. From https://www.investopedia.com/terms/t/treasurybill.asp

It says "T-bills are issued at a discount from the par value—or the face value—of the bill, meaning the purchase price is less than the face value of the bill. For example, a $1,000 bill might cost the investor $950 to buy the product."
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Old 21-05-2020, 08:03 PM   #3
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The math is off a bit. Take $10,000, divide by 1.018, and you get $9,823.18 (rounded to the nearest penny). That would then be the price for a 12 month t-bill yielding 1.8% nominal per annum.

....As it happens, a 12 month Singapore T-bill isn't currently yielding 1.8%. It's yielding quite a bit less than that, so the price will be higher.
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Old 21-05-2020, 09:59 PM   #4
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The math is off a bit. Take $10,000, divide by 1.018, and you get $9,823.18 (rounded to the nearest penny). That would then be the price for a 12 month t-bill yielding 1.8% nominal per annum.

....As it happens, a 12 month Singapore T-bill isn't currently yielding 1.8%. It's yielding quite a bit less than that, so the price will be higher.
So I will be paying $9823.18 first and I get back $10000 upon it mature?

Not that I'm paying $10000 and get the principal + int later?
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Old 21-05-2020, 10:22 PM   #5
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So I will be paying $9823.18 first and I get back $10000 upon it mature?

Not that I'm paying $10000 and get the principal + int later?
This.

"Interest rate: No coupon. Issued at a discount to the face value
Interest payments: Upon maturity, investors receive the face value"

https://www.mas.gov.sg/bonds-and-bil...or-Individuals
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Old 21-05-2020, 10:42 PM   #6
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What actually happens in a Singapore t-bill auction is that you place a noncompetitive bid to purchase $10,000 of face value, let’s suppose. You should do that on the last day your bank allows, and individual investors should only be placing noncompetitive bids since then you’ll get the lowest possible price (highest yield) at auction.

When you place your bid, $10,000 is deducted from your bank account. The auction then occurs, and a couple business days after the auction the difference between the best auction price and $10,000 is refunded automatically to your bank account. Then, a year later when the t-bill matures, $10,000 is paid to you.
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Old 23-05-2020, 12:59 AM   #7
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SGS year bills are yielding 0.23%, so the number is more like you pay $9977 upfront and get $10k in a year's time, but otherwise the math is pretty much right.

When you place your bid, $10,000 is deducted from your bank account. The auction then occurs, and a couple business days after the auction the difference between the best auction price and $10,000 is refunded automatically to your bank account. Then, a year later when the t-bill matures, $10,000 is paid to you.
As a side note, that's going to get entertaining if a bill auction ever clears at a negative interest rate.
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Old 23-05-2020, 08:49 AM   #8
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As a side note, that's going to get entertaining if a bill auction ever clears at a negative interest rate.
Not too entertaining. What probably happens the first time around is that the next lower $1,000 increment is selected ($9,000 instead of $10,000 in this example), the remainder is refunded, and then the bank and/or MAS adopt a 5% or 10% uplift rule the next time around. (Currently it’s 15% uplift for reopened bond auctions.) And life goes on....

....Or MAS fills all noncompetitive bids at 0.01% yield the first time it happens as a goodwill gesture, the uplift rule is adopted, and life goes on.
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