Singapore Treasury bills (T-bills)

[chopra]

anyone tried uob?

Application via OCBC's internet banking portal will begin from 31 March 2023, while application via UOB's internet portal will begin from 22 April 2023.


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[reddevil0728]

anyone tried uob?

Application via OCBC's internet banking portal will begin from 31 March 2023, while application via UOB's internet portal will begin from 22 April 2023.


Read HWZ Forum Rules!

What’s the problem?

can try the next round?

 

[FrostWurm]

i have countered every point royalmix mentioned. the conclusion is still there is no good reason to go for nc.

If I don't have a view on interest rates, and I am open to being a price-taker based on the bids submitted by the large corporations/banks, what is wrong with NC?

 

[dork32]

If I don't have a view on interest rates, and I am open to being a price-taker based on the bids submitted by the large corporations/banks, what is wrong with NC?

two problems

nc can kena partial

price taker? you sure? i give you 2%, you still want it?

if you really a price taker, i intro you posb savings account. dbs decides the rate for you

the fact is when you are into tbills, you are not a price taker, you are just too lost to decide a number for comp bid. you are are a real price taker, you would have gone to the banks. they have decided the rate, why dont you take it?

 

[FrostWurm]

two problems

nc can kena partial

price taker? you sure? i give you 2%, you still want it?

if you really a price taker, i intro you posb savings account. dbs decides the rate for you

That's precisely the point about price-taking

If you gave me 2% in May 2020 when the yield was less than 0.3%, sure, I will take it right away (assuming your credit worthiness is the same as a AAA-rated sovereign) and make a nice profit.

Would you be willing to do so for me the next time the yield falls below 2%?

The fact that you dare to quote 2% now is because the current rate is way above 2%.

If the current rate is 10%, I would even dare to quote 5% or 6%. But this is utterly meaningless because I already know the current rate is 10%.

The interest rates for t-bills are largely based on bids submitted by large corporations/financial institutions. I personally do not have prophetic abilities to forecast whether it will be 3.57% or 3.60% and make a bid on this basis. What if it turns out to be 3.55%? Oops?

So then am I exposed to the black swan event of getting "2%"? Yes, but that would mean that all the big institutions submitted extremely low bids based on the information available to them. The big boys with all their professional investment teams, with the wide universe of investments available to them, submitted a lowly bid of 2%? For no apparent reason at all? When US rates are above 4%?

Sure, if this were to happen, I would be very worried because it means they (including my wonderful local bank DBS) have either gone crazy or have very deep insider information that would warrant an investigation from MAS.

TLDR:
It is meaningless to duapao and make quotes based on known prices.
Institutional investors are not dumb and also want to maximise their returns.
NC is not useless if you don't have a view on interest rates. If you have a view on interest rates, submit a competitive bid by all means.

 

[reddevil0728]

That's precisely the point about price-taking

If you gave me 2% in May 2020 when the yield was less than 0.3%, sure, I will take it right away (assuming your credit worthiness is the same as a AAA-rated sovereign) and make a nice profit.

Strawman

Would you be willing to do so for me the next time the yield falls below 2%?

The fact that you dare to quote 2% now is because the current rate is way above 2%.

If the current rate is 10%, I would even dare to quote 5% or 6%. But this is utterly meaningless because I already know the current rate is 10%.

The interest rates for t-bills are largely based on bids submitted by large corporations/financial institutions. I personally do not have prophetic abilities to forecast whether it will be 3.57% or 3.60% and make a bid on this basis. What if it turns out to be 3.55%? Oops?

So then am I exposed to the black swan event of getting "2%"? Yes, but that would mean that all the big institutions submitted extremely low bids based on the information available to them. The big boys with all their professional investment teams, with the wide universe of investments available to them, submitted a lowly bid of 2%? For no apparent reason at all? When US rates are above 4%?

Sure, if this were to happen, I would be very worried because it means they (including my wonderful local bank DBS) have either gone crazy or have very deep insider information that would warrant an investigation from MAS.

TLDR:
It is meaningless to duapao and make quotes based on known prices.
Institutional investors are not dumb and also want to maximise their returns.
NC is not useless if you don't have a view on interest rates. If you have a view on interest rates, submit a competitive bid by all means.

I guess you don’t understand the economics concept of opportunity cost and what’s “next best alternative”.

because if you truly do, you wouldn’t make this argument.

 

[FrostWurm]

Strawman

I guess you don’t understand the economics concept of opportunity cost and what’s “next best alternative”.

because if you truly do, you wouldn’t make this argument.

Nope, its not a strawman. Using ex-post data to make a ridiculous ex-ante assertion is not logically coherent.

Please enlighten me on how the "economics concept of opportunity cost and what’s next best alternative” applies in this context. Looking towards a fruitful explanation.

 

[FrostWurm]

if you really a price taker, i intro you posb savings account. dbs decides the rate for you

the fact is when you are into tbills, you are not a price taker, you are just too lost to decide a number for comp bid. you are are a real price taker, you would have gone to the banks. they have decided the rate, why dont you take it?

Banks have a wide variety of savings instruments, ranging from current accounts to savings accounts to fixed deposits (and with different maturities).

Since you quoted DBS, let me show the DBS webpage for fixed deposits:

https://www.dbs.com.sg/personal/rates-online/singapore-dollar-fixed-deposits.page

Is it just me or do the short-term rates seem lower than the T-bill rate? Conversely, the long-term rates are actually higher than the Singapore 5-year government bond rates. Moreover, isn't it odd that amounts above $20k give only a 0.05% interest rate, whereas T-bills don't have such an odd pricing? If you were to extend the question, you could even ask why do different banks offer different interest rates in the first place?

Whether to place money in fixed deposits or to buy T-bills instead is based on a wide variety of considerations. I have ChatGPT-ed the response here for everyone's convenience:

1. Issuer: Treasury bills are issued by the government, while fixed deposits are offered by banks.
2. Tenure: Treasury bills have a fixed tenure, typically ranging from 91 days to 1 year, while fixed deposits can have a range of tenures, from a few months to several years.
3. Risk: Treasury bills are considered to be very low-risk investments because they are backed by the government. In contrast, fixed deposits are relatively low-risk investments but are subject to the credit risk of the issuing bank, even if some of them might be insured by the government.
4. Returns: The returns on treasury bills are typically lower than those on fixed deposits because of their low risk. Fixed deposits may offer higher returns, but this is usually based on the tenure of the deposit and the prevailing interest rate.
5. Liquidity: Treasury bills are highly liquid and can be easily traded on the secondary market, while fixed deposits are not as liquid and may have penalties for early withdrawal.
6. Minimum Investment: Treasury bills typically have a higher minimum investment than fixed deposits.

Essentially, although fixed deposits and t-bills are similar, there are some differences that one needs to consider before deciding which to invest in.

 

[reddevil0728]

Nope, its not a strawman. Using ex-post data to make a ridiculous ex-ante assertion is not logically coherent.

You are looking at things in isolation.

Please enlighten me on how the "economics concept of opportunity cost and what’s next best alternative” applies in this context. Looking towards a fruitful explanation.

You can’t control what other ppl do.

but you can control what you do.

if the place you currently hold the amount that’s meant to be for t-bill is yielding 2%, will you accept a t-bill for anything less than 2%?

 

[reddevil0728]

Banks have a wide variety of savings instruments, ranging from current accounts to savings accounts to fixed deposits (and with different maturities).

Since you quoted DBS, let me show the DBS webpage for fixed deposits:

https://www.dbs.com.sg/personal/rates-online/singapore-dollar-fixed-deposits.page

Is it just me or do the short-term rates seem lower than the T-bill rate? Conversely, the long-term rates are actually higher than the Singapore 5-year government bond rates. Moreover, isn't it odd that amounts above $20k give only a 0.05% interest rate, whereas T-bills don't have such an odd pricing? If you were to extend the question, you could even ask why do different banks offer different interest rates in the first place?

How is that relevant to price taking?

why are you talking about what’s odd?

Whether to place money in fixed deposits or to buy T-bills instead is based on a wide variety of considerations. I have ChatGPT-ed the response here for everyone's convenience:

1. Issuer: Treasury bills are issued by the government, while fixed deposits are offered by banks.
2. Tenure: Treasury bills have a fixed tenure, typically ranging from 91 days to 1 year, while fixed deposits can have a range of tenures, from a few months to several years.
3. Risk: Treasury bills are considered to be very low-risk investments because they are backed by the government. In contrast, fixed deposits are relatively low-risk investments but are subject to the credit risk of the issuing bank, even if some of them might be insured by the government.
4. Returns: The returns on treasury bills are typically lower than those on fixed deposits because of their low risk. Fixed deposits may offer higher returns, but this is usually based on the tenure of the deposit and the prevailing interest rate.
5. Liquidity: Treasury bills are highly liquid and can be easily traded on the secondary market, while fixed deposits are not as liquid and may have penalties for early withdrawal.
6. Minimum Investment: Treasury bills typically have a higher minimum investment than fixed deposits.

Essentially, although fixed deposits and t-bills are similar, there are some differences that one needs to consider before deciding which to invest in.

Uhuh. Is there anything new?

 

[FrostWurm]

if the place you currently hold the amount that’s meant to be for t-bill is yielding 2%, will you accept a t-bill for anything less than 2%?

Can you clarify what is "the place you currently hold the amount that’s meant to be for t-bill"?

The yield of this hypothetical "place" is obviously dependent on what type of investment it is. There is simply no way any T-bill is yielding 2% now (given the current interest rate environment) because this would have been reflected in the drop in price of the T-bill.

 

[reddevil0728]

Can you clarify what is "the place you currently hold the amount that’s meant to be for t-bill"?

Example someone have 10k in DBS multiplier earning 2% interest.

but if t-bill provides 3.8% interest don’t mind putting the 10k in t-bill.

but wouldn’t want it if it is less than 2%

The yield of this hypothetical "place" is obviously dependent on what type of investment it is. There is simply no way any T-bill is yielding 2% now (given the current interest rate environment) because this would have been reflected in the drop in price of the T-bill.

There’s a difference between technical impossibility and low probability

 

[dork32]

The interest rates for t-bills are largely based on bids submitted by large corporations/financial institutions. I personally do not have prophetic abilities to forecast whether it will be 3.57% or 3.60% and make a bid on this basis. What if it turns out to be 3.55%? Oops?

you are showing total ignorance. i have said many time. do not bid what you feel the rate would be. bid the rate that you really dont want.

if i predict 3.8%, and i am happy with 3.55, i would be an idiot to bid 3.6. like i said you are too blur, you dont even know what you really want or dont want. an glorified word for this is price taking.

 

[dork32]

So then am I exposed to the black swan event of getting "2%"? Yes, but that would mean that all the big institutions submitted extremely low bids based on the information available to them. The big boys with all their professional investment teams, with the wide universe of investments available to them, submitted a lowly bid of 2%? For no apparent reason at all? When US rates are above 4%?

coe was $1 thru close bidding. t bills is close bidding. you can never really guess what the rate you would be. what is wrong in putting a bit of insurance to prevent me from being hit by this when it cost me nothing?

 

[dork32]

TLDR:
It is meaningless to duapao and make quotes based on known prices.
Institutional investors are not dumb and also want to maximise their returns.
NC is not useless if you don't have a view on interest rates. If you have a view on interest rates, submit a competitive bid by all means.

instituitional investors are not protected. they can control what they bid but cannot control what others do.

instituitional investors are not dumb, they know how to protect themselves with competitive bids.

yes nc is totally useless. it does not matter if you have a view or not on what the rate is going to be. doing a competitive bid beats nc hands down

 

[dork32]

Banks have a wide variety of savings instruments, ranging from current accounts to savings accounts to fixed deposits (and with different maturities).

Since you quoted DBS, let me show the DBS webpage for fixed deposits:

https://www.dbs.com.sg/personal/rates-online/singapore-dollar-fixed-deposits.page

Is it just me or do the short-term rates seem lower than the T-bill rate? Conversely, the long-term rates are actually higher than the Singapore 5-year government bond rates. Moreover, isn't it odd that amounts above $20k give only a 0.05% interest rate, whereas T-bills don't have such an odd pricing? If you were to extend the question, you could even ask why do different banks offer different interest rates in the first place?

Whether to place money in fixed deposits or to buy T-bills instead is based on a wide variety of considerations. I have ChatGPT-ed the response here for everyone's convenience:

1. Issuer: Treasury bills are issued by the government, while fixed deposits are offered by banks.
2. Tenure: Treasury bills have a fixed tenure, typically ranging from 91 days to 1 year, while fixed deposits can have a range of tenures, from a few months to several years.
3. Risk: Treasury bills are considered to be very low-risk investments because they are backed by the government. In contrast, fixed deposits are relatively low-risk investments but are subject to the credit risk of the issuing bank, even if some of them might be insured by the government.
4. Returns: The returns on treasury bills are typically lower than those on fixed deposits because of their low risk. Fixed deposits may offer higher returns, but this is usually based on the tenure of the deposit and the prevailing interest rate.
5. Liquidity: Treasury bills are highly liquid and can be easily traded on the secondary market, while fixed deposits are not as liquid and may have penalties for early withdrawal.
6. Minimum Investment: Treasury bills typically have a higher minimum investment than fixed deposits.

Essentially, although fixed deposits and t-bills are similar, there are some differences that one needs to consider before deciding which to invest in.

piang, what is this crab? we are not here to talk about this. i just say you want to take price, go to dbs. you want to have a say of price, go to tbills

 

[dork32]

the way you post also shows that you do not understanding the tbill bidding process.

how to bid?

bid the lowest number that you can tahan. eg the lowest number i can tahan is 3.8%. i can get 3.8% with my savings. no point going for anything lower

do not bid what you predict will happen. eg i predict the next round tbill is 3.7%. i go bid 3.7%. no, i will either 3.8 or not bid at all. it is a waste of time if i go for 3.7

yes there is big problem with nc. i say again.

nc does not protect yourself against very low coy. do a comp bid to avoid this.

there is a chance of partial allocation if you go nc.

as i have said before the only advantage of going nc is that you are totally lost, like frostworm. you really dont know how to bid. you really dont know what the mechanics is like. you come in here and give a glorified account of yourself, a price taker.

 

[dork32]

Can you clarify what is "the place you currently hold the amount that’s meant to be for t-bill"?

The yield of this hypothetical "place" is obviously dependent on what type of investment it is. There is simply no way any T-bill is yielding 2% now (given the current interest rate environment) because this would have been reflected in the drop in price of the T-bill.

there is no way tbills is going to go 2%. there is no way man u can lose 7-1 to liverpool

it is not whether it is going to go there, it is what you are going to to protect yourself if it goes there. especially if there is no cost incurred in putting in the protection

 

[dork32]

Nope, its not a strawman. Using ex-post data to make a ridiculous ex-ante assertion is not logically coherent.

Please enlighten me on how the "economics concept of opportunity cost and what’s next best alternative” applies in this context. Looking towards a fruitful explanation.

the concept of opportunity cost is this. i dont know if the term is correct or not, but it goes like this.

the number you bid is the number you will get if your bid is not successful.

if i dont get i put my money in dbs savings, i will bid 0.05

if i dont get, i refund my housing withdrawal to cpf oa, i will bid 2.5

if i dont get i go dbs multiplier, i will bid 4.1.

if i dont get, i go uob, i will bid 7.8% (like dat might as well dont bid, go straight to uob)

how do i know where your money would be if your bid is unsuccessful. you decide for yourself. and dont be a lost child that go nc

i will never nc. i hoped that you are enlightened

 

[FrostWurm]

the concept of opportunity cost is this. i dont know if the term is correct or not, but it goes like this.

the number you bid is the number you will get if your bid is not successful.

if i dont get i put my money in dbs savings, i will bid 0.05

if i dont get, i refund my housing withdrawal to cpf oa, i will bid 2.5

if i dont get i go dbs multiplier, i will bid 4.1.

if i dont get, i go uob, i will bid 7.8% (like dat might as well dont bid, go straight to uob)

Thank you for your example. It is very clear what your position is.

Based on your example, there is absolutely no reason for you to even consider the first 3 options, because the last option of UOB dominates the first 3 options.

Let's say you are now considering whether to buy a T-bill, and if so, whether to submit a competitive or non-competitive bid.

Based on your previous posts, if you choose to buy a T-bill, you will submit a bid of 7.9%.

If your bid is unsuccessful, as is likely to be the case and as you pointed out, then you would simply invest it into UOB and earn 7.8%. Alternatively, if your bid is somehow successful, then you get a T-bill of possibly 7.9% or more which is fantastic. In either case, the most you would lose is probably just one to two days of interest (let's assume this amount is trivial).

I think this is a perfectly legitimate way of reasoning, if you view T-bills to be completely equivalent to your deposit in UOB (which happens to be your next best alternative that you are ok to have).

Now why would anyone submit a NC bid if they can just bid 7.9% (and likely fail) or else go to UOB for 7.8%? The main reason is because the person simply prefers to take the risk-free rates of the country each month as it rises and falls. There may be other constraining factors that contribute to this decision, for example if they are unable to meet the minimum criteria for UOB, or if they prefer their investment to be issued by the government rather than just deposited into a local bank, or if they want to have the option to profit from selling the T-bill if there is a massive drop in interest rates. I just want to point out that there are fundamental differences between owning a T-bill and having a deposit in UOB. In many cases, they will be similar but I have pointed out in an earlier post some of the differences involved. It is up to the individual investor to decide.

The final result of the auction is largely determined by the competitive bids made by institutional investors, who also want to get as much interest income as possible. If you are happy tagging along, there is no reason why you cannot submit an NC bid. A lot of people have submitted NC bids but I have yet to hear of any discontent. Ultimately, I don't think submitting an NC bid is an inferior decision in any way. But if your current approach works for you, that's great too.