Treasury Bills, Notes, and Bonds Discussion

[disneysteve]

Maybe I am making this harder than it is but I am confused. If I wanted to buy a T bill via my Vanguard brokerage in the secondary market, there are so many T bills so what criteria do you use to decide which one to buy?

Are all T bills and notes that will mature on the same date going to have the same yield whether they were originally a 4 week, a 13 week, a 1 year or a 2year treasury? Do you have to analyze the bills/notes to see which have the higher yield or lower price? I do understand that we buy T bills at a discount whereas notes pay interest every 6 months.

For example, if I wanted something that matures in 30 days is there some analysis to determine which bill or note is the better buy? Better might be a lower cost or have a higher yield or both?

I like the idea of being able to go in and just buy something vs the waiting for days when buying via auction so the secondary market sounds like it is convenient, quicker result. However, it is unclear how this is done correctly on the secondary market.

Maybe I'm missing out but I prefer to keep it simple. I'm sure there are details and nuances to the process that could tweak my returns a bit but I just don't care to delve that deeply.


I go on, pick the term range I want (7-9 months for example) and then choose the bond with the best rate that matures closest to when I want it to. That's not always the absolute best rate available but I'm okay with that.

 

[jazz4cash]

:



., why would anyone lock up their money for one year in a CD paying notably less than a 6-month treasury?



?

If look at all the posts here, there many seasoned investors on this board that are fairly new to buying Treasuries, including myself. Every time I suggest to a family member to try an online bank I get the eye roll. These are exotic investments to many people and banks like BofA have sheepled them into settling for safety and foregoing interest.

 

[disneysteve]

If look at all the posts here, there many seasoned investors on this board that are fairly new to buying Treasuries, including myself.

Me too. I bought my first Treasuries earlier this year. Now I'm singing their praises everywhere I can but I was one of those people buying CDs instead, though I did at least search online and find the best rate I could. I didn't just stroll into my local bank and take what they were offering.

 

[MBSC]

Plus the same expiration and minimum purchase amount constantly changes throughout the day. At least on Schwab it does. It might require 250 minimum, then I refresh the screen, and it is now minimum of 1. Happens many times.

Fidelity is similar until you click on 'depth' to see the entire inventory. I don't have Schwab but found a Youtube video of their bond search results. The last column on the right was 'Market Depth' with a link to view. If the display hasn't changed, clicking this link should show the entire inventory for that security from multiple dealers with all the different minimums all at once.

 

[RetireAge50]

I am using Vanguard and although I can drill down and see all the individual quantities and pick them manually it doesn’t seem like I need to. If I know the maturity and amount I would like to buy the order screen automatically shows me the best possible yield to worst (YTW). Click on it, review and then submit. All done. When I compare this for buying $25,000 versus $1,000,000 the rates are very close.

I am really new at this though so will continue looking at it. I’m liking it so far and have purchased treasuries using the secondary market, auction, quick screen, and manual filtering.

 

[JoeWras]

If look at all the posts here, there many seasoned investors on this board that are fairly new to buying Treasuries, including myself. Every time I suggest to a family member to try an online bank I get the eye roll. These are exotic investments to many people and banks like BofA have sheepled them into settling for safety and foregoing interest.

I've been investing for over 22 years, with 21 1/2 of those years being Treasury Direct. It has not been sexy since CDs were usually just a bit better. I did it for just a little diversification. Small amounts. My primary reason for being on Treasury Direct was iBonds.

Then earlier this year as rates popped, I was buying more on TD and started seeing threads here and on BH about buying at brokerage. I finally sat down and learned. I knew about it, but was just too lazy because it didn't matter much since I had TD.

Now that I'm using the brokerage, I feel like an addict who went from pill popping to mainlining the whole syringe.

 

[disneysteve]

Now that I'm using the brokerage, I feel like an addict who went from pill popping to mainlining the whole syringe.

LOL. Our current budget calls for a 2.5% WR. I’d be lying if I said the thought hadn’t occurred to me to dump everything into 3.5-4% treasuries and brokered CDs.

 

[jazz4cash]

Me too. I bought my first Treasuries earlier this year. Now I'm singing their praises everywhere I can but I was one of those people buying CDs instead, though I did at least search online and find the best rate I could. I didn't just stroll into my local bank and take what they were offering.

It’s really a benefit of hanging out here on this forum. The ZRIP made us look for better options. We’ve found and shared CD deals, MYGAs, corporate bonds and now treasuries. So much better than sitting on the sideline. Gaining knowledge is powerful.

 

[audreyh1]

The last time I bought treasuries was during the 2017-2019 rate rise when short-term treasuries yielded more than CDs.

Prior to that Fed rate rises go all the way back to 2003-2006. I wasn’t chasing yields back then and money market funds hadn’t gone to zero yield anyway. I think they bottomed around 3%.

This stuff is cyclical.

 

[big-papa]

We use TD for I-bonds. But we also use TD for auto-rolling T-bills. We have several of them overlapping right now for money we have earmarked for some home improvement projects coming up in a few months. No intention of selling any before maturity.

Cheers.

 

[jazz4cash]

I had a TD account around 2005 as suggested by Bob Brinker. I ordered a “How To” book that included auction application forms in the back. Fill ‘em out and mail ‘em in. Wait. The auction result was 6 3/8 for a 5 yr note! When it matured the rates were really low but I ended up with Penfed CD special 10 yr@ 5%. The current rates are OK but still fairly low.

 

[Graybeard]

Maybe I'm missing out but I prefer to keep it simple. I'm sure there are details and nuances to the process that could tweak my returns a bit but I just don't care to delve that deeply.


I go on, pick the term range I want (7-9 months for example) and then choose the bond with the best rate that matures closest to when I want it to. That's not always the absolute best rate available but I'm okay with that.

This post is closest to telling me what I asked. The Fido BH post didn't really help cuz I am on Vanguard and completely unfamiliar with the FIDO screens. I'm sure Vanguard has similar screens but not understanding what I am looking at means I don't understand it.

I tend to over analyze things thinking they are more involved than they may be. If buying in the secondary market is as simple as:
1. finding the time period I want
2. that has the highest rate

then that does seem straight forward.

My question then is they show you "yield", "YTW" and YTM" which yield should I be looking at? It seems the YTM and YTW are the same most of the time but maybe not always.

 

[disneysteve]

My question then is they show you "yield", "YTW" and YTM" which yield should I be looking at? It seems the YTM and YTW are the same most of the time but maybe not always.

Someone please correct me if I'm wrong, but on Treasuries YTW and YTM should always be the same since Treasuries aren't callable.


I think the screen is just set up that way so that it's consistent with other types of bonds where those two numbers may be different.

 

[jazz4cash]

Someone please correct me if I'm wrong, but on Treasuries YTW and YTM should always be the same since Treasuries aren't callable.


I think the screen is just set up that way so that it's consistent with other types of bonds where those two numbers may be different.

That is my understanding also.

 

[wallygator69]

First time buying Treasury and goofed a little

Hi Folks,


I bought $300K T Bills for the first time thanks to you folks...


BUT...I put my entire IRA in 6 month T's and need about $30k in December for a ROTH conversion. Can/should I just sell in December or should I call and cancel it and buy the 3 month T Bill instead?



Thanks again,


Wally

 

[jazz4cash]

Hi Folks,


I bought $300K T Bills for the first time thanks to you folks...


BUT...I put my entire IRA in 6 month T's and need about $30k in December for a ROTH conversion. Can/should I just sell in December or should I call and cancel it and buy the 3 month T Bill instead?



Thanks again,


Wally

Looking at rates right now. The 6 month is 3.29% and the 3 mo is 3%. The difference on 30k over a 3 month period is tiny if you cancel a portion now and buy the 3 mo instead. Or you could just sell at any time. No commission (I think). If you wait the price/yield could change (favorably or unfavorably) but again it seems like it would not be a big difference.

 

[jazz4cash]

Looking at the Vanguard Treasury offerings I see several bonds with 50 unit minimums to buy or sell but Fidelity always seems to have multiple options to buy or sell a single bond. That is very troubling in terms of liquidity if I am relying on Vanguard. I am thinking you could sell a small quantity but maybe you have to call it in.

 

[audreyh1]

Where do people get their quotes?

I’m seeing the 3 month at 2.92% and 6 month at 3.357% from the CNBC app. It will change a bit by the Tuesday morning auction.

Those are pretty close to the US Treasury published closing rates by coupon equivalent shown here (2.91% and 3.36%) https://home.treasury.gov/resource-..._bill_rates&field_tdr_date_value_month=202209

 

[jazz4cash]

Where do people get their quotes?

I’m seeing the 3 month at 2.92% and 6 month at 3.357% from the CNBC app. It will change a bit by the Tuesday morning auction.

Those are pretty close to the US Treasury published closing rates by coupon equivalent shown here (2.91% and 3.36%) https://home.treasury.gov/resource-..._bill_rates&field_tdr_date_value_month=202209

I use the CNBC app sometimes. I also use the US Treasury website for historical data but I really don't know what those prices are and I can't actually buy or sell anything at those sources. The yields I quoted are from the Fidelity yield table and represent the highest yield available to purchase when the market closed.

 

[RetireAge50]

Looking at the Vanguard Treasury offerings I see several bonds with 50 unit minimums to buy or sell but Fidelity always seems to have multiple options to buy or sell a single bond. That is very troubling in terms of liquidity if I am relying on Vanguard. I am thinking you could sell a small quantity but maybe you have to call it in.

I put in an order picking the item with the highest YTW even though the minimum was 1000. Then I entered my 25 quantity and Vanguard automatically found another bond for me very close to the same YTW. I then just had to confirm.

 

[MBSC]

Where do people get their quotes?

I’m seeing the 3 month at 2.92%....

If you are referring to the 3% 3-month T-bill posted above, the Fidelity yield table has a one month buffer if there is a security available. When I go to the inventory page, it is for a 12/27/22 maturity, almost 4 months, and 1000 bond minimum.

 

[audreyh1]

If you are referring to the 3% 3-month T-bill posted above, the Fidelity yield table has a one month buffer if there is a security available. When I go to the inventory page, it is for a 12/27/22 maturity, almost 4 months, and 1000 bond minimum.

Thanks! That explains why it was showing 3% instead of the 2.92% or thereabouts that would be close to the next auction price for the 3 month T-bill.

Definitely apples and oranges then.

 

[jazz4cash]

I put in an order picking the item with the lowest YTW even though the minimum was 1000. Then I entered my 25 quantity and Vanguard automatically found another bond for me very close to the same YTW. I then just had to confirm.

ok thanks. Good to know but why pick the lowest YTW? I imagine the difference is tiny anyway.

 

[Dash man]

Hi Folks,


I bought $300K T Bills for the first time thanks to you folks...


BUT...I put my entire IRA in 6 month T's and need about $30k in December for a ROTH conversion. Can/should I just sell in December or should I call and cancel it and buy the 3 month T Bill instead?



Thanks again,


Wally

If you don’t need the cash and just want to do the conversion, you can just transfer $30k of the T bills in kind.

 

[workmyfingerstothebone]

Been a while since I posted anything but I've been reading about T-Bills, Corporate bonds, iBonds and this on the site.


Finally took the plunge and picked up ibonds @ 9+% interest for 2022 and bought gift ibonds at the same rate to be delivered in 2023.


Had I not read about this technique, on this site, I would have missed a great opportunity.


Next purchased my first 1yr T-Bills @ 3.1% and my first agency bonds 2yr @4.1 YTM!

I'm working on building a bond ladder .


Thanks for everyone's input.


Plan to hold each to maturity except maybe the ibonds. That'll be a question for you folks in the future.