You will prepare a complete application plan for the next T-bill auction without placing any money.
Arjun has read about T-bills for weeks, and he still has not applied. Each time an auction comes round he finds something he has not checked: his CDP account is not linked, or the bank closed its window the day before, or he has not decided what happens to the money afterwards. This exercise fixes that. You will write a complete plan for the next auction on paper, without placing any money, so that when you do apply it takes five minutes. Allow about 25 minutes.
Use a sheet with four sections: funding, dates, bid and maturity. The worked example below uses Arjun's figures, and every date and rate in it is made up.
Decide whether the money comes from cash, SRS or your CPF Ordinary Account, using what you learned in lesson 4.4, Paying with cash, SRS or CPF, and what each really costs. Then confirm the account is ready to use.
For cash, you need a CDP account linked to your bank account for payments, and enough money in the bank account on the day you apply. For SRS, you need an SRS account with the balance in it. For CPF, you need to meet the CPFIS conditions and have a CPF investment account with an agent bank. Opening any of these takes days or weeks, so this step comes first.
Arjun writes: "Funding: cash, S$20,000 from my savings account. CDP account opened last year and linked to the same bank. Checked the link in my CDP online account."
Get the next auction for the tenor you want from the MAS auction calendar. Write down the auction date and the issue date. Then go to your bank's T-bill page and write down its closing time for your funding source. For CPF, it will usually be earlier than for cash. Finally, work out the maturity date, which MAS lists with the issue.
Arjun's made-up dates are: bank closing time 9pm on 3 March, auction on 5 March, issue on 10 March and maturity on 8 September. That is 182 days from issue to maturity.
Check that the maturity date falls before the date you need the money, with some days to spare. If it falls after, pick a shorter tenor or a different auction.
Decide between a competitive and a non-competitive bid using lesson 4.3, Competitive or non-competitive: which bid to place. If you choose competitive, write the yield you will bid and the reason for that number. A reason sounds like "I have a fixed deposit offer at this rate for the same term, so I do not want anything lower". Without a reason like that, a competitive bid is a guess.
Before choosing, look at the last few cut-off yields on the MAS website for the same tenor, as you did in lesson 4.2. They show you the recent range and how busy recent auctions have been.
Arjun writes: "Bid: non-competitive. I have no better offer for six months, and if I am only partly filled, the rest stays in savings until the next auction." He also notes the last three cut-offs and the date he checked them.
This is the step most people leave blank, and it is the one that decides whether the plan does its job. On the maturity date, the face value comes back to you: to your bank account for cash, to SRS or to CPF otherwise. Decide now what it is for. There are three choices.
You can roll it into the next bill. Your cash comes back only on the maturity date itself, so the next auction you can join with that money is one whose bank closing time falls after it. Write that auction down, or note that you will bridge the gap with other cash.
You can move it to a deposit or another instrument, such as a fixed deposit or an SSB. Then write which, and check its application window.
Or you can spend it, if the bill was holding money for a dated expense. Then write the expense and its due date.
Arjun writes: "At maturity on 8 September: roll into the next six-month bill if the yield is still above my savings account by more than one point. Otherwise move to a fixed deposit." He sets a calendar reminder two weeks before the maturity date to check.
A finished plan fits on one page. It names the funding source and confirms the account is ready. It lists four dates: the bank's closing time, the auction, the issue and the maturity. It states the bid type, with a yield and a reason if competitive. And it says in one or two sentences what will happen to the money on the maturity date. Nobody should need to ask you a question to carry it out.
Fill in the same four sections for the next auction you could realistically join.
Fill in the T-bill application plan template for the next auction, including bid type, funding source, dates and what you will do at maturity.
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