T-Bills, or Treasury Bills, are essentially short-term loans provided to governments by investors, and they’re a way for these governments to gather necessary funds. They’re generally viewed as one of the most secure investment options around, mainly because they carry the financial guarantee of the issuing government.
When an investor buys T-Bills, they do so at a price below their face value. The full face value is returned to the investor when the T-Bill matures, and the gain for the investor is the amount between the purchase price and the face value.
To illustrate, suppose you buy a T-Bill for $950, and it matures at $1,000. In this case, you earn a profit of $50.
Recently, the Monetary Authority of Singapore (MAS) held an auction for six-month T-Bills that revealed a cut-off yield of 3%. This figure is slightly less than the 3.08% seen in the auction before, according to Business Times.
Even with this minor decline in yield, there was a significant surge in demand. The bid-to-cover ratio jumped to 2.45 from the previous 1.96, demonstrating that investor interest remains robust, despite the modestly lower yields.
This steady demand underlines investor confidence in T-Bills as a sound investment, providing assurance even when yields are not exceptionally high.
Pros and Cons of T-Bills
Pros:
- Low Risk: Since T-Bills are government-backed, they offer returns that are essentially guaranteed.
(Additional content for pros and cons can be added as necessary.)
