For the past two years, investors enjoyed taking minimal risk while earning attractive returns from Singapore Treasury Bills (T-bills). With yields above 3%—even exceeding 4% at one point for the 1-year bill—these AAA-rated instruments offered better returns than CPF OA interest, and demand surged.
This momentum spilled over to longer-tenure government instruments like the Singapore Savings Bonds and 10-year SGS, both briefly yielding above 3%.
But good things don’t last forever. Yields peaked in 2023 and have since declined. The 1-year T-bill now yields just 2.12%—almost half its peak and below the CPF OA rate again.
So investors are asking: Is it still worth parking money in T-bills?
This brings us to a key concept—reinvestment risk: when your maturing investment can no longer be rolled over into something equally attractive.
In fact, based on Singapore’s long-term average inflation rate of 2.59% (from 1962 to 2025, according to Trading Economics), the current 2.12% T-bill yield doesn’t even keep pace with inflation. That means you’re actually losing purchasing power over time.
The good news? There are still income-generating alternatives. One of them is REITs (Real Estate Investment Trusts), which distribute dividends—typically twice a year, just like the semi-annual payouts of 6-month T-bills.
If your T-bills are maturing, here’s why REITs deserve a closer look.
1. Higher Yields for a Bit More Risk (But Manageable)
The primary reason to invest in REITs is higher yield. According to SGX’s Q1 2025 REIT Chartbook, the 41 Singapore-listed REITs offer an average yield of 6.9%, far above the current 1-year T-bill’s 2.12%.
Now, to be clear—REITs are not as safe as government securities. They aren’t even the same asset class. But like T-bills, REITs pay consistent income, and for those willing to take on more risk, the yield spread is significant.
The risks? First, price volatility. REITs can easily swing more than 1% in a day, especially in a weak market. Second, no capital guarantee. You could end up with a net loss if prices drop more than the income you received.
That said, these risks are manageable if you stick to higher-quality REITs, maintain sufficient diversification, and accept that price fluctuations are part of the game—as long as the underlying properties stay tenanted and generate rental income.
While REITs are riskier than T-bills, they’re also less volatile than broader equities. If you look at the yield-versus-volatility chart below, you’ll see that many Singapore-listed REITs exhibit lower volatility compared to major stock indices—suggesting a better risk-reward profile than regular stocks.
To simplify things, you can invest through REIT ETFs to instantly gain diversification without the hassle of picking individual REITs. Here are five options listed on SGX:
2. Capital Gains Upside When Rates Fall
Over the past decade, S-REITs have outperformed the Straits Times Index (STI) in terms of total return, most of the time—driven by a combination of high dividend yields and gradual capital appreciation.
However, since 2022, rising interest rates have weighed on REITs. As financing costs climbed, their profits and distributable income declined, making them less attractive to investors. As a result, REIT prices fell—and the Straits Times Index (STI) has since caught up with REITs in terms of total returns.
But this is where contrarian investors may find opportunity. Falling REIT prices could present attractive entry points, especially if the fundamentals remain intact.
Looking ahead, interest rates are expected to decline, with the Fed projected to cut rates. In Singapore, we’re already seeing signs of easing—the Singapore Overnight Rate Average (SORA), often used to price property loans, has dropped to around 2.25%.
This shift reduces pressure on REITs. And if rates continue to fall, REITs could benefit from both improved margins and capital gains as investor sentiment turns more favorable.
3. No Maturity Dates—And No Reinvestment Risk
Unlike T-bills, which have fixed maturities and return your capital plus interest at the end of the term, REITs do not mature. While this also means they lack a capital guarantee, it helps you avoid reinvestment risk—the challenge of finding a comparable or better-yielding investment when your T-bills mature. That’s especially relevant now, as yields have dropped significantly.
REITs can distribute dividends indefinitely, as long as they own income-generating properties. While dividends aren’t guaranteed, the better-managed REITs have demonstrated consistent, and in some cases, growing distributions over time.
This makes REITs a strong option for long-term income. You can continue collecting dividends without the need to constantly reinvest every few months, as you would with short-term T-bills. In short, T-bills are ideal for short-term cash parking, while REITs are better suited for building sustainable, long-term passive income.
Additionally, REITs offer greater investment flexibility:
With T-bills, you must commit to lump-sum investments.
With REITs, you can opt for a dollar-cost averaging (DCA) plan—buying small amounts regularly. This spreads out your entry prices and helps reduce the risk of buying too much at a peak.
And if liquidity is a concern, REITs offer far easier access to your money. They are traded on the exchange and can be sold anytime during market hours, whereas T-bills must be transacted over-the-counter (OTC), which can involve lower liquidity and more friction.
In summary, REITs provide ongoing income, more flexible entry, and better liquidity, making them a compelling alternative as interest rates decline.
4. Real Estate Is Easier to Understand—And You Collect Rent Without the Effort
For conservative investors used to the safety of T-bills, jumping into equities can feel like a leap. But REITs offer a more approachable step up, with business models that are straightforward and familiar—they own and rent out properties. This is far easier to grasp than industries like biotech or AI.
In fact, REITs are a natural fit for property-loving Singaporeans. They offer exposure to a diversified basket of properties without the massive capital outlay required for direct real estate. While buying a property might require six or seven figures (plus a hefty mortgage), you can start investing in REITs with just a few hundred dollars.
What’s more, REITs enjoy tax transparency—qualifying REITs don’t pay corporate tax on rental income. In contrast, rental income from direct property ownership is taxable for individuals. That means REITs can distribute more of their earnings to investors, resulting in higher net yields.
And best of all, you skip the hassle. Property management, rent collection, tenant turnover, and asset decisions are all handled by professionals. All you have to do is invest and collect dividends, checking in periodically to ensure your holdings remain sound.
5. Diversification: Invest Across Economic Cycles, Not Just in Risk-Free Assets
While we’ve highlighted the benefits of REITs, we’re not suggesting you go all-in—nor should you play it too safe by putting 100% into T-bills. The key is to diversify across a range of income-generating assets to better navigate different economic environments and build a more resilient portfolio.
Each asset class performs differently across economic cycles. REITs tend to do well during periods of inflation and economic growth, when rents rise and property values appreciate. In such scenarios, treasuries may underperform due to their relatively low yields.
Conversely, when interest rates rise, REITs often struggle—just like we saw in 2022—while treasuries become more attractive as their yields increase.
Right now, we’re entering a regime where inflation is cooling and interest rates are falling. This environment typically favors REITs over short-term government bonds, which now offer lower reinvestment returns.
So, the takeaway isn’t to switch everything from T-bills to REITs, but to rebalance in a measured way—holding both, or even more asset types, to position your portfolio for strength across different cycles. Diversification builds resilience.
Time to Boost Your Yield from 2% to 6%
With the 1-year Singapore T-Bill yield down to just 2.12%, reinvesting may no longer be worthwhile—especially if your bills have recently matured or are coming due soon.
It’s time to consider alternatives. REITs currently offer an average dividend yield of 6.9%, presenting a strong case for income-focused investors willing to take on modest, manageable risk.
Plus, property is a familiar and intuitive asset class—easy to understand, accessible with low capital, and professionally managed through REITs. And with REIT ETFs, it’s now even easier to achieve instant diversification without the hassle of picking individual trusts.
Don’t let your money sit idle at 2%. Start exploring better-yielding opportunities today – Unlock Opportunities in Singapore REITs
Disclosure: This article is sponsored by SGX. However, all opinions expressed are solely those of the author.
