CPF SA

[dork32]

For every $1,000 of SA you get about $3.33 per month of interest. 7 months is about $23.33. So yes, you need about 4.66% EIR on a 6 month T-bill to recover all of that.

But "SA shielding" using any/every other method requires that you lose at least 1 month of SA interest. So you're benchmarking this against the bond unit trust method (for example). And 4.33%, or about half a month of SA interest loss, is still a really, really great deal in comparison. There's nothing particularly "magical" about a 4.33% EIR except that it's roughly the halfway mark between 4.00% and 4.66% EIRs.

If you're willing to tolerate the full month of interest loss (as you would with bond unit trust-based shielding methods) then your 6 month T-bill is typically acceptable at ~4.00% EIR.

wat rubbish is this? since when cpf interest got half month one?

 

[dork32]

based on what bbc say is this:

if you want to get back all your interest lost on you sa, tbills should give 4.66%

if you want compare with using unit trust to shield, assume that there is 0 loss using this, you still lose one month interest. then tbills should give you 4%

4.25% and 4.33% is total rubbish

 

[BBCWatcher]

wat rubbish is this? since when cpf interest got half month one?

based on what bbc say is this:
if you want to get back all your interest lost on you sa, tbills should give 4.66%
if you want compare with using unit trust to shield, assume that there is 0 loss using this, you still lose one month interest. then tbills should give you 4%
4.25% and 4.33% is total rubbish

It ain't that complicated, Dork32. 4.33% EIR/4.25% COY is about halfway in between — it "splits the difference." It's a reasonable bid for these purposes, if you choose to make it. That's all.

The unit trust-based SA shielding method can be executed from the comfort of your sofa. Placing a T-bill bid currently requires visiting a bank branch and queuing, and that's somewhat yucky. I personally wouldn't be motivated to place a T-bill bid for SA shielding with only a 4.00% EIR outcome. But I personally would be motivated to place a T-bill bid for SA shielding at something less than 4.66% EIR. Split the difference...4.33% EIR. I can live with that. YMMV.

 

[dork32]

It ain't that complicated, Dork32. 4.33% EIR/4.25% COY is about halfway in between — it "splits the difference." It's a reasonable bid for these purposes, if you choose to make it. That's all.

The unit trust-based SA shielding method can be executed from the comfort of your sofa. Placing a T-bill bid currently requires visiting a bank branch and queuing, and that's somewhat yucky. I personally wouldn't be motivated to place a T-bill bid for SA shielding with only a 4.00% EIR outcome. But I personally would be motivated to place a T-bill bid for SA shielding at something less than 4.66% EIR. Split the difference...4.33% EIR. I can live with that. YMMV.

it is not complicated. but you are really making it complicated.

only someone that cannot count will take an average fro this sort situation. you dont take average for everything. for many things it is either here or there. there is no such thing as a middle ground.

all these really sums up one thing, you cannot count. just admit that it is a mistake and move on. the more you try to defend, the more lame you look

 

[dork32]

for 6 months t bills, the break even of 7 months lost of interest is 2.9%. the breakeven for 8 months of interest is 3.3%.

so we should go for a break even of 3.1%? coz 3.1% is the average of 2.9 and 3.3? 3.1 is a meaningless number. it is either 2.9 or 3.3. 3.1 is just a number for fun

 

[BBCWatcher]

You asked a question, and I politely answered it. The rest is on you.

Queuing at a bank branch has a cost of some sort (compared to unit trust-ing it from a sofa), and there’s a slight risk the T-bill could straddle one or more months when SA dollars would’ve earned interest above the floor rate. (With a unit trust you’re in and out when you know what the SA rate is. We don’t know the SA rate yet for 2Q2023 and particularly 3Q2023.) In my view 4.00% EIR is clearly too low for a T-bill but 4.66% EIR is clearly too high. The answer for me is somewhere in between. So (finger in the wind…) I’ll accept the halfway mark, thanks, to reflect the queuing cost and SA rate risk. You don’t like this answer, but it happens to be a reasonable one.

What EIR would like to suggest as “the“ answer? You want to argue it’s actually 4.26% EIR that tips the balance in favor of T-bill-based shielding instead of unit trust-based shielding? Or 4.37% EIR? Or something else? If you want to compute the cost of bank queuing based on wage rates and then add in some formula about SA interest rate risk over the T-bill tenor, be my guest and have fun. But I’m very comfortable with 4.33% EIR if I were making this decision today or soon. It’s “close enough,” and that’s all that’s required here since queuing costs and SA rate risks are hard to quantify.

OA is different. Different scenario, different estimates. And no, I would not queue in a bank branch for mere breakeven. Less rate risk, too. (SA will unpeg from floor way before OA does.)

 

[dork32]

You asked a question, and I politely answered it. The rest is on you.

i asked a question coz i think what you have posted is rubbish. you politely confirmed that it is rubbish

many people are reading here. i hate it when people come in and post rubbish. to think that many idolize you. many will actually believe what you have posted is true and make wrong decisions based on your rubbish

if just admit that what you have posted is rubbish

 

[dork32]

In my view 4.00% EIR is clearly too low for a T-bill but 4.66% EIR is clearly too high. The answer for me is somewhere in between. So (finger in the wind…) I’ll accept the halfway mark, thanks, to reflect the queuing cost and SA rate risk. You don’t like this answer, but it happens to be a reasonable one.

your view does not mean a thing. maths means everything.

if maths says that it is too high, so be it. if it is really too low, then too bad. where go such thing as accept half way mark. maybe your ang moh maths works this . we sg people dont count this way.

it does not matter if the number sounds reasonable or. i can tell you. it does not sound reasonable to me. that is why i asked in the first place. your stupid explanation may fool many. it is not going to fool me.

i tell you wat 8.88^% is a better yield. it is rasonable to me. some more it is a damn lucky number for ah beng like me

 

[dork32]

we sg people dont count this way.

ok lah, i take back my word lah. most sg people cannot count. this is why so many sg people think anything an ang moh write must be correct.

 

[BBCWatcher]

What’s your real estimate?

Rubbish is trying to be more precise than the circumstances allow. Competent engineers know this, and so do competent financial people. What’s the cost of bank branch queuing? What’s the risk-adjusted cost of SA rate uncertainty that comes with the latter months of a 6 month T-bill? I don’t know exactly, and neither do you. And trying to compute it won’t really help. We’re already in the ballpark, and the ballpark is already small. You don’t have to know, not exactly. I’ll take the over-under, today or soon, at 4.33% EIR, thanks. You’re welcome to pick a different EIR as you’d like.

By sheer coincidence yesterday I was on the phone with a prospective client. And the conversation was very much centered on what matters (what to worry about) to maximize the odds of a successful outcome and what doesn’t. And there’s a LOT that just doesn’t matter, in those particular circumstances anyway. It’s the slightly smarter people who figure that out. Then they have more and more happy clients with successful outcomes.

 

[dork32]

What’s your real estimate?

Rubbish is trying to be more precise than the circumstances allow. Competent engineers know this, and so do competent financial people. What’s the cost of bank branch queuing? What’s the risk-adjusted cost of SA rate uncertainty that comes with the latter months of a 6 month T-bill? I don’t know exactly, and neither do you. And trying to compute it won’t really help. We’re already in the ballpark, and the ballpark is already small. You don’t have to know, not exactly. I’ll take the over-under, today or soon, at 4.33% EIR, thanks. You’re welcome to pick a different EIR as you’d like.

my answer to the question is ths:

the other method of shielding is using unit trust. because of the uncertainty, we take it that there is no loss when you make this move. despite that there is not transactional loss, you still lose month of sa interest when you shield this way.

at a tbill yield of 4% ( ok loh you like 3.92 then 3.92), you will lose one month of 4% interest in the sa. this is similar to that when you shield using the unit trust.

to recover the one month loss in interest, you need a yield of 4.66%.

in other words, for the purpose of shielding a 4% yield would be good enuf. for the purpose of recovering all the interest loss, it would be 4.66%

 

[dork32]

What’s the cost of bank branch queuing? What’s the risk-adjusted cost of SA rate uncertainty that comes with the latter months of a 6 month T-bill? I don’t know exactly, and neither do you. And trying to compute it won’t really help.

you want to count my bus fare to go to the bank. you want to count my effort to scold that stupid ah tiong for cutting que. you want to count my effort to curse that ah pek that que in front of my just to update his passbook? we dont go count this. you count wat can be predicted. that is
if you are shielding, bid 4%
if you looking for a profitable investment bid 4.7%
if you are damn lost. bid 4.25%, 4.34%, or do like what we bengs like 4.08, 4.18, 4.28, 4.38, 4.48. huat ah

 

[BBCWatcher]

But you haven’t accounted for bank queuing costs or the SA rate risk in the outer months of the 6 month T-bill, the risk that the SA rate will be higher than 4%. I have, and I’ll be happy with 33 basis points (or more) of EIR margin on the T-bill, thanks. What EIR would you want and why?

On edit: OK, you’re finally seeing the point, I think. How do you quantify these costs and risks? Well, you could try…but why bother? Pick something reasonable and go live your life. Today I’d pick 4.33% EIR for the T-bill, or a COY bid of 4.25%. Close enough, and if that doesn’t fire I’d fall back on the unit trust method.

 

[dork32]

But you haven’t accounted for bank queuing costs or the SA rate risk in the outer months of the 6 month T-bill, the risk that the SA rate will be higher than 4%. I have, and I’ll be happy with 33 basis points (or more) of EIR margin on the T-bill, thanks. What EIR would you want and why?

On edit: OK, you’re finally seeing the point, I think. How do you quantify these costs and risks? Well, you could try…but why bother? Pick something reasonable and go live your life. Today I’d pick 4.33% EIR for the T-bill, or a COY bid of 4.25%. Close enough, and if that doesn’t fire I’d fall back on the unit trust method.

there is totally no basis to your 33 basis points. you like the number 3. so you choose 4.33. so i tell people 4.88 coz i like 8. just put down the facts. the people do the rest of the calculations themselves.

if you are happy with some nonsensical stuff, just keep it to yourself.

you can see how lame you are trying to defend your lousy number:
first you say it is because of one month lost of interest
then it became 4.33 is the average of 4 and 4.66
then 4 is too low and 4.66 is too high. so 4.33 is good
now it is to recover other crab losses.

notice how you try to confuse everyone with all the crab? notice i summarize it into 5 lines of rubbish. notice how i stick to 4% and 4.66% on the same reason from the very start

 

[BBCWatcher]

And your better answer is…?

BBCWatcher’s 6 month T-bill for SA shielding bid now or soon would be: 4.25% cut-off yield
Dork32’s 6 month T-bill for SA shielding bid now or soon would be: X.XX% cut-off yield

What would you bid?

 

[dork32]

And your better answer is…?

BBCWatcher’s 6 month T-bill for SA shielding bid now or soon would be: 4.25% cut-off yield
Dork32’s 6 month T-bill for SA shielding bid now or soon would be: X.XX% cut-off yield

What would you bid?

you maths is bad. now your reading skills is also gone.
bid 4% if you are doing shielding
bid 4.7% if you are doing investment with sa.

 

[BBCWatcher]

bid 4% if you are doing shielding

So if you were bidding in the next auction your 6 month T-bill for SA shielding bid would be 3.92% cut-off yield (COY), the bid that corresponds to an EIR of 4.00%? Which means you evaluate bank queuing costs and SA rate risks at zero?

 

[reddevil0728]

So if you were bidding in the next auction your 6 month T-bill for SA shielding bid would be 3.92% cut-off yield (COY), the bid that corresponds to an EIR of 4.00%? Which means you evaluate bank queuing costs and SA rate risks at zero?

Thought dork said bid?

dork didn’t mention EIR

 

[vsvs24]

So if you were bidding in the next auction your 6 month T-bill for SA shielding bid would be 3.92% cut-off yield (COY), the bid that corresponds to an EIR of 4.00%? Which means you evaluate bank queuing costs and SA rate risks at zero?

I won't include bank queuing time in evaluation.

It is like I do online shopping compare price and found one at 20% cheaper. I won't say because I took 1 hr to surf I only get it 10% cheaper instead of 20%

 

[BBCWatcher]

Thought dork said bid?
dork didn’t mention EIR

He also didn't mention COY either, and I'm quite sure Dork32 is capable of posting in this forum.

I won't include bank queuing time in evaluation.

I do. Maybe we evaluate the cost of bank branch queuing differently.

It is like I do online shopping compare price and found one at 20% cheaper. I won't say because I took 1 hr to surf I only get it 10% cheaper instead of 20%

But it's not like that. It's not online shopping at Site A versus online shopping at Site L. The unit trust-based SA shielding method is the online shopping. You can do it from your sofa. (Well, most people can.) Buying a 6 month T-bill for SA shielding requires queuing at a bank branch. So the comparison is online shopping versus "brick and mortar" shopping. I find online shopping more convenient (less costly), so I assign some cost to the "brick and mortar" option. I also assign some cost to the risk that the SA interest rate will unpeg from its floor (rise above 4.0%) during the latter month(s) of the 6 month T-bill. Then I estimate what COY/EIR would be sufficiently attractive for me to favor T-bill-based shielding over bond unit trust-based shielding, and currently I have set those numbers to be 4.25%/4.33% based on how I feel about the net cost and risk differences. That also happens to be the equivalent of about half a month of SA interest at the floor rate (T-bill relative to unit trust).

How would you bid (COY) if you were bidding in the next 6 month T-bill auction for SA shielding purposes?