Treasury Bills, Notes, and Bonds Discussion

[audreyh1]

Thanks. I just looked and the auction dropped to 2.326% and the 2 secondary bills increased to 2.362% and 2.360% respectively. It's small differences when talking about 1 or 10 T bills, it might be more important if you're buying hundreds of T bills. My desire to maximize this for the "best/perfect" outcome is not worth the trouble. I was more interested in whether I understood the yields of the 2 secondary bills and if not where do I look. Either purchasing option seems to work, I think I'll buy 1 on the secondary market today to see how it works like when I bought my 1st at auction.

I’m confused. The next 4 week T-bill auction is tomorrow 9/8 so it hasn’t happened yet. Last week’s came in at 2.509%.

I think all the info you have right now is where the secondary market is trading. You don’t know the auction yield yet.

 

[Dash man]

Term: 119-Day
Investment Rate*: 3.274%
Price: $98.943875

 

[thefinancebuff]

I just looked and the auction dropped to 2.326% and the 2 secondary bills increased to 2.362% and 2.360% respectively.

It sounds like you're still looking at Vanguard's Indicative Yield. It's just a random number they throw out. Ignore it. It's meaningless to compare the Indicative Yield with the yields on the secondary market.

 

[audreyh1]

It sounds like you're still looking at Vanguard's Indicative Yield. It's just a random number they throw out. Ignore it. It's meaningless to compare the Indicative Yield with the yields on the secondary market.

+1

 

[Maximus]

It sounds like you're still looking at Vanguard's Indicative Yield. It's just a random number they throw out. Ignore it. It's meaningless to compare the Indicative Yield with the yields on the secondary market.

So is there no way to determine an auction treasury YTM until after it is purchased? Are Vanguards indicative yield and looking at the secondary market they only crystal ball we have?

 

[audreyh1]

It’s an auction. The result cannot be exactly determined in advance.

Instead you have what the secondary market is trading at close to the auction. That’s it. The prior week auction can help, but it’s stale.

 

[JoeWras]

So is there no way to determine an auction treasury YTM until after it is purchased? Are Vanguards indicative yield and looking at the secondary market they only crystal ball we have?

Yes. It is the definition of an auction. Small time investors are just along for the ride but still feel the auction results from the bidders. Only the big boys do the actual competitive bidding.

EDIT: more info: How treasury auctions work. https://www.treasurydirect.gov/instit/auctfund/work/work.htm

It is a bit confusing but basically the institutions bid for the available pool, then everyone gets the "best" bid, including those of us riding in the non-competitive pool.

 

[aja8888]

Funny thing about AUCTIONS....no one knows the final selling price until the hammer closes the bidding.

 

[jazz4cash]

Funny thing about AUCTIONS....no one knows the final selling price until the hammer closes the bidding.

And I thought we were building consensus that the difference between auction and secondary market is minor, unless you have 100's of thousands to invest. In that case this forum is not likely an appropriate resource.

 

[audreyh1]

And I thought we were building consensus that the difference between auction and secondary market is minor, unless you have 100's of thousands to invest. In that case this forum is not likely an appropriate resource.

The difference is minor. Nothing aja8888 posted indicated otherwise.

We’re just pointing out that you can’t know the exact yield ahead of the auction, but you can get a very good idea by looking at where the most recent issue is trading on the secondary market. It’s going to be close.

This page gives the closing yield each day for the most recent issue t-bill. https://home.treasury.gov/resource-..._bill_rates&field_tdr_date_value_month=202209

Apps like CNBC app let you build a watchlist that shows the trading of the most recently issued t-bills and notes during each day. Right now this snapshot is after the market close today 9/7. During the trading day you see changes.

BTW, the 4 week (1 month) rate has dropped quite a bit this week on the secondary market after a jump on 9/2. I added the 5-day chart of yield for that too.

 

[jazz4cash]

The difference is minor. Nothing aja8888 posted indicated otherwise.

I was not suggesting anything otherwise was indicated. I quoted aja’s post but my comment was not directed at aja. I see posters splitting hairs to compare auction vs. secondary rates when the difference for most of us is nil. It’s more likely a factor other than the rate will lead one to choose where to purchase.

 

[audreyh1]

Totally misunderstood then, sorry.

My observation is that I often see a little spike in yield at the auction time indicating that maybe the much larger purchases at auction are negotiating a slightly higher yield (lower price). But this doesn't always happen.

At some point too the prices displayed (like in the CNBC app) are going to switch to the newest issued treasuries. These new issues aren't actually available to the secondary market until three days after the auction, so I don't know how that all works either.

 

[Graybeard]

I’m confused. The next 4 week T-bill auction is tomorrow 9/8 so it hasn’t happened yet. Last week’s came in at 2.509%.

I think all the info you have right now is where the secondary market is trading. You don’t know the auction yield yet.

Correct, the 4 week yield is Vanguard's indicative yield which has dropped to 2.153% of as right now. Of course that can change so until the auction is over you won't know the actual yield.

 

[Graybeard]

It sounds like you're still looking at Vanguard's Indicative Yield. It's just a random number they throw out. Ignore it. It's meaningless to compare the Indicative Yield with the yields on the secondary market.

I agree. Unless I am missing something, it appears that buying in the secondary market has advantages that I prefer vs at auction. You know what the yield is when you buy it, it settles the next day vs days later and you can pick the yield and maturity you want.

 

[JoeWras]

The whole auction process is really quite fascinating and the function of our government completely depends on it. This debt service keeps us going. The auction and secondary markets work symbiotically, playing off each other. This is intentional and by design in order to keep the market efficient. So one can predict the other, and visa versa. It is almost a contradiction. The structure of the auction intentionally supports a liquid secondary market by insuring a very diverse group of buyers.

The following article goes in depth on the process and is an interesting read. The one tidbit I got was that the process changed in the early 90s so everyone got the same winning bid, except for those with bids out of range who get nothing. Before this, the bids could have multiple prices, which led to irregularities (which I don't understand).

https://www.newyorkfed.org/medialibrary/media/research/current_issues/ci11-2.html

 

[Graybeard]

The difference is minor. Nothing aja8888 posted indicated otherwise.

We’re just pointing out that you can’t know the exact yield ahead of the auction, but you can get a very good idea by looking at where the most recent issue is trading on the secondary market. It’s going to be close.

This page gives the closing yield each day for the most recent issue t-bill. https://home.treasury.gov/resource-..._bill_rates&field_tdr_date_value_month=202209

Apps like CNBC app let you build a watchlist that shows the trading of the most recently issued t-bills and notes during each day. Right now this snapshot is after the market close today 9/7. During the trading day you see changes.

BTW, the 4 week (1 month) rate has dropped quite a bit this week on the secondary market after a jump on 9/2. I added the 5-day chart of yield for that too.

Audreyh1 Why is your link https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_bill_rates&field_tdr_date_value_month=202209
showing different rates than the one I look at which is https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202209?

Am I looking at the wrong thing?

 

[audreyh1]

Don’t know what a par yield curve is. That’s sounds calculated.

I just know that my link is the Fed daily snap shot of the rates for the most recent issued t-bills trading on the secondary market taken near the end of each trading day.

It seems to track quite closely with what the CNBC app reports at close - within a few basis points.

I notice that the 13 week and 26 rates are quite close on the two links. I don’t know why the 4 week and 8 week are so different.

 

[audreyh1]

After market this evening as of 8:05 pm EDT the 4 week (1 month) treasury traded at rate 2.242% up 0.038 from the close.

Let’s take a look at where it is in the morning before the auction.

 

[audreyh1]

Pre-market this morning as of 6:45 am EDT the 4 week (1 month) treasury traded at a rate of 2.257% up 0.053 from yesterday’s market close.

We’ll check again some time after the bond market opens at 8:00am this morning. And later see what the auction results are for the new issue 4 week late morning.

ETA: later premarket is had dropped a little compared to earlier pre-market trading. Was at 2.226% as of 7:33am EDT up 0.022 from yesterdays close.

 

[copyright1997reloaded]

Yield curve changes since 9/1/22

So I'm trying to decide how/where to invest another slug of cash pulled from various bank/cu accounts. One of my criteria is that I want/need most of the funds to be available mid to late spring 23 if I move/buy another house.

Given the yield curve changes since 9/1/22, I'm inclined to skip the 4 week and 8 week auctions today and go for either the 3 or 6 month auctions on Monday 9/12. (I do have another hour or so to decide this.)

 

[JoeWras]

Although I did buy a few 4 and 8s, I'm happy with the 13s.

You can hedge your bets and put 1/3 in 26 week, and 2/3 in 13 weeks. For flexibility, it might be simplest to just do a 13 week and revisit it in December. Maybe your home plans will change by then.

 

[audreyh1]

After market open - 4 week (1 month) t-bill is yielding 2.224% as of 8:33am up 0.020 from yesterdays close.

So at this point it seems likely that the auction would come in around 2.2xx%. We’ll see what happens later this morning.

 

[rdy4er]

Well, I’m a (bad)market timer but I sold 1/2 of my total bond fund today and am buying treasuries in next week’s auction. Wish I would have done it six months ago.

 

[audreyh1]

At this point 4 week t-bill is trading around 2.244% as of 11:15am ET this morning. Rate up by 0.040.

Schwab deadline for entering same day auction orders was 9:30am. The US Treasury has an 11:00am deadline for non-competitive orders for the auction, and competitive bidders must have their bids in by 11:30am.

So at this point we can wait for the auction results to be published.

 

[thefinancebuff]

At this point 4 week t-bill is trading around 2.244% as of 11:15am ET this morning. Rate up by 0.040.

Schwab deadline for entering same day auction orders was 9:30am. The US Treasury has an 11:00am deadline for non-competitive orders for the auction, and competitive bidders must have their bids in by 11:30am.

So at this point we can wait for the auction results to be published.

Auction closed at 2.50%. Waiting for the auction paid off.