T-bill interest and cost.
Interest earned
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You pay upfront (approx)
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Buy at a discount, get the full face value back
A Singapore Treasury bill works backwards from how most people picture a bond. There is no coupon. Instead you bid in an auction, the Monetary Authority of Singapore sets a cut-off yield, and you pay less than the face value upfront. At maturity, six months or one year later, you receive the full face value. The gap between what you pay and what you get back is your return, and for individuals that return is tax-free. This calculator estimates that gap and shows the cash you tie up to earn it.
One honest caveat that the tool flags but does not over-engineer: it computes interest as face value times yield times the fraction of a year. In a real auction the discount is applied to the price you pay rather than the face value, so the true yield on the smaller sum you actually invest is fractionally higher than the headline. For planning purposes the difference is small, and keeping the arithmetic transparent is more useful than chasing the last basis point.
A six-month bill at the cut-off yield
Say you put in for $50,000 of face value on a six-month bill that clears at a 3 percent cut-off yield. Because the tenure is half a year, the tool halves the annual yield.
| Step | Value |
|---|---|
| Face value (received at maturity) | $50,000 |
| Cut-off yield per year | 3 percent |
| Tenure fraction | 6 of 12 months |
| Interest: $50,000 times 3 percent times one half | $750 |
| Approximate cash paid upfront | $49,250 |
You front roughly $49,250 today and collect $50,000 in six months, pocketing $750 with no tax to pay on it. The chart shows the discount as the thin teal slice that grows into your full principal at maturity.
Cash, SRS, or CPF: which wallet should buy it
You can fund a T-bill with cash, with SRS savings, or with CPF Ordinary Account money, and the right choice is not the same for everyone. Cash and SRS are straightforward, since idle balances in both earn little. The CPF Ordinary Account is the interesting case. It already pays a floor of 2.5 percent, so using OA money only makes sense when the T-bill yield clears that hurdle by enough to cover the lost OA interest during the gap between when CPF deducts your funds and when the bill is issued. Buy a bill yielding barely above 2.5 percent with OA money and the timing drag can leave you worse off than if you had left it in the OA.
A practical tip for the auction itself: a non-competitive bid guarantees you an allocation at the eventual cut-off yield, which suits most savers who simply want the going rate. A competitive bid lets you name a maximum yield, but if you set it too low you can be filled at a worse price or not at all. The common mistake is bidding competitively to chase a slightly higher yield and ending up unallocated, leaving the cash earning nothing while the bill you wanted goes to others.
What happens if I need the money before the T-bill matures?
Unlike a Singapore Savings Bond, a T-bill cannot be redeemed early on demand. You would have to sell it on the secondary market through a bank, at whatever price prevails, which can be above or below what you paid. If there is any chance you will need the cash inside six months, an SSB or a flexible deposit is the safer home. Buy T-bills with money you can leave until maturity.
Is the T-bill return really tax-free?
For individuals, yes. Interest from Singapore Government Securities, including T-bills, is exempt from income tax for individuals, and Singapore has no capital gains tax, so a gain on selling early is not taxed either. That tax-free status is a quiet advantage over some foreign-currency deposits whose interest may be taxable depending on where it is earned.