Treasury Bills, Notes, and Bonds Discussion

[audreyh1]

I also think of it as $75K in T-bills for a particular issue, although price wise it’s most often presented as 1 T-bill = $100 at maturity. It’s the brokerages that make you buy bonds and CDs in units of $1000. At Treasury Direct you buy in increments of $100.

https://www.treasurydirect.gov/marketable-securities/treasury-bills/

 

[Spock]

Is there ever a scenario where t-zeros are taxed as capital gains vs. regular interest income?
For example... today is Feb 7 2023. There is a treasury zero/stripped that matures on 2/15/24... > 1year.
If it is sold after 2/7/24 but before it matures on 2/15/24 (presumably at close to full value), would that be taxed as a long term (>1year) capital gain?

 

[pb4uski]

^^^ I don't think so.

 

[Graybeard]

Interesting, I just think of it as buying one $75K T bill, probably because it shows as 1 line on my brokerage.
Can't look to see right now, but if it really is seventy-five $1K T-bills, I'm really glad they don't list it that way at the brokerage. Imagine how long the page would be

I also think of it as $75K in T-bills for a particular issue, although price wise it’s most often presented as 1 T-bill = $100 at maturity. It’s the brokerages that make you buy bonds and CDs in units of $1000. At Treasury Direct you buy in increments of $100.

https://www.treasurydirect.gov/marketable-securities/treasury-bills/

I buy them on Vanguard's website. There is a box that starts at $1,000 or 1, I can't recall which. I click and hold the arrow until it hits the dollar or number I want to buy, again despite having done this many times I can't recall which it is. If I invest $75k I view it as 75 $1,000 T bills but done with 1 purchase and shows on my statement as 1 line. Yeah, 75 lines would be horrendous!

 

[gromit]

A while back, it was mentioned that Fidelity's "expected yields" on the Treasury new issues page seemed to be conservative numbers. I was looking for something else on Fidelity and stumbled across the formulas they use to calculate the expected yield field. Just in case anyone wants to know:

The “Expected Yield” shown on the New Issue Auction Results page on Fidelity.com is determined using the following:
•If Auction Time to Maturity (TTM) is less than or equal to 6 months, the yield will reflect the lowest secondary offering Treasury Bill yield maturing +/- 10 days from the auction maturity date.
•If Auction TTM is greater than 6 month and is less than or equal to 7 years, the yield will reflect the lowest secondary offering Treasury yield maturing +/- 40 days from the auction maturity date.
•If Auction TTM is greater than 7 years, the yield will reflect the lowest secondary offering Treasury yield maturing +/- 115 days from the auction maturity date.

So the expected yield is really at the low end of expected values.

 

[audreyh1]

It’s often way too low and ends up being a useless distraction IMO.

Just checking this Treasury page for recent coupon equivalent rates on the secondary market will give you a much better idea, and during this phase of rising short-term rates my experience is that the auction rates often come in just a bit higher. This pages tracks the most recent issue of each T-bill.
https://home.treasury.gov/resource-..._bill_rates&field_tdr_date_value_month=202302

I can see that Fidelity is trying to be thorough. But it’s not helpful here.

 

[copyright1997reloaded]

It’s often way too low and ends up being a useless distraction IMO.

Just checking this Treasury page for recent coupon equivalent rates on the secondary market will give you a much better idea, and during this phase of rising short-term rates my experience is that the auction rates often come in just a bit higher. This pages tracks the most recent issue of each T-bill.
https://home.treasury.gov/resource-..._bill_rates&field_tdr_date_value_month=202302

I can see that Fidelity is trying to be thorough. But it’s not helpful here.

In my spreadsheet, when I put an order in, I take the previous week's 6-month yield (assuming I'm buying another 6-month issue) and then adjust the $/per $100 slightly upward after looking at the 6-month 5-day CNBC chart. For example for these maturities:
8/3/23 came in at $97.6340
8/10/23: came in at $97.5961
so for 8/17/2 I have penciled in (spreadsheet calc): $97.6500
That's close enough for government work and gives me a reasonable (but conservative) expectation. If things change more than expected between now and Monday I can always either decrease/pull my order or add to it. (For example, earlier this week I upped my order by 10k since rates had moved up > 4.9%)

 

[audreyh1]

Yes, I usually use the CNBC app watching the 5-day chart. It shows the most recent issue bid price on the secondary market - same as the Treasury page. CNBC doesn’t have tickers for the newer 8 week and 17 week t-bills though, so the Treasury page is a good backup.

Yes, if some shock happens causing a sudden drop in rates, early morning on auction day it is still possible to cancel an order. But I don’t because I like certain interval timing and I figure it averages out over the long run anyway.

The 26 week is staying firmly above 4.9% so expect it will approach 5% soon.

Also CPI report is next Tuesday Feb 14, and that will likely impact short-term rates.

 

[audreyh1]

Today’s T-bill auction results:

Bills	CMB	CUSIP	Issue Date	High Rate	Investment Rate	Price per $100
4-Week	No	912796Z69	02/14/2023	4.520%	4.599%	$99.648444
8-Week	No	912796CT4	02/14/2023	4.600%	4.698%	$99.284444
13-Week	No	912796ZE2	02/09/2023	4.590%	4.708%	$98.839750
17-Week	No	912797FN2	02/14/2023	4.700%	4.840%	$98.446389
26-Week	No	912796XY0	02/09/2023	4.755%	4.940%	$97.596083

Rates keep moving on up!

 

[Fermion]

I had gotten in for 50k of the 26 week so I guess I got the 4.94% rate

 

[Graybeard]

Today’s T-bill auction results:

Bills	CMB	CUSIP	Issue Date	High Rate	Investment Rate	Price per $100
4-Week	No	912796Z69	02/14/2023	4.520%	4.599%	$99.648444
8-Week	No	912796CT4	02/14/2023	4.600%	4.698%	$99.284444
13-Week	No	912796ZE2	02/09/2023	4.590%	4.708%	$98.839750
17-Week	No	912797FN2	02/14/2023	4.700%	4.840%	$98.446389
26-Week	No	912796XY0	02/09/2023	4.755%	4.940%	$97.596083

Rates keep moving on up!

Mind the Gap: Bond Yields Appear Set for a Rebound
February 9, 2023 Kathy Jones
https://www.schwab.com/learn/story/mind-gap-bond-yields-appear-set-rebound

Over the next few months, we see room for yields to move higher, especially if the inflation data come in stronger than anticipated.

 

[audreyh1]

Well we get an updated peek next Tuesday with the CPI report release at 8:30am ET.

 

[Montecfo]

Well we get an updated peek next Tuesday with the CPI report release at 8:30am ET.

The January 2022 number was . 6. So if we get . 6 for Jan 2023 as some have suggested, then the annual number is unchanged.

But would be higher than recent trend and I expect would reduce bond prices and equity values and raise interest rates somewhat.

And anything below . 6 probably has the opposite effect.

 

[copyright1997reloaded]

Well we get an updated peek next Tuesday with the CPI report release at 8:30am ET.

In the meantime, watch for those revisions:

WASHINGTON, Feb 10 (Reuters) - U.S. monthly consumer prices rose in December instead of falling as previously estimated, revised government data showed on Friday.

The consumer price index edged up 0.1% in December rather than dipping 0.1% as reported last month, the Labor Department's annual benchmark revisions of CPI data showed. Data for November was also revised higher to show the CPI increasing 0.2% instead 0.1% as previously estimated.

https://www.reuters.com/markets/us/us-december-consumer-prices-revised-higher-2023-02-10/#:~:text=Data%20for%20November%20was%20also,instead%200.1%25%20as%20previously%20estimated.&text=The%20government%20recalculated%20seasonal%20adjustment,January%202018%20through%20December%202022.

 

[wanaberetiree]

As many of you here I am using my ca$h to buy T-bills, I use 8 weeks.

I am thinking that sometime in the future when it will be more clear that the Feds will stop interest rate hikes, it will be a good time to start buying longer-term treasuries maybe 10-20 years, etc.

My thinking process is that if I got long-term bonds and interests start coming down, and I need cash, I will be able to sell bonds with profit.

Does this sound like a reasonable assumption?

Thx

 

[jim584672]

TreasuryDirect finally updated my bank, only 6 weeks from when I mailed it. Had to have the bank stamp and sign a special form. Originally the form said Medallion stamp, the bank flatly refused a Medallion stamp but gave a general stamp. What a pain.

 

[Marc]

In the meantime, watch for those revisions:


https://www.reuters.com/markets/us/us-december-consumer-prices-revised-higher-2023-02-10/#:~:text=Data%20for%20November%20was%20also,instead%200.1%25%20as%20previously%20estimated.&text=The%20government%20recalculated%20seasonal%20adjustment,January%202018%20through%20December%202022.

These are seasonally adjusted rates; I don't see anything that changed the unadjusted CPI-U number. I am keenly interested as I kept 2022 AGI to 203,900 anticipating 204,000 as floor to IRMAA.

 

[audreyh1]

These are seasonally adjusted rates; I don't see anything that changed the unadjusted CPI-U number. I am keenly interested as I kept 2022 AGI to 203,900 anticipating 204,000 as floor to IRMAA.

That’s correct, the annual unadjusted rate won’t change, just the seasonally adjusted ones. I do my recent 6 month calculations based on the unadjusted numbers via the inflationdata.com cumulative inflation calculator. However the seasonally adjusted month by month numbers are what drive the headlines, and thus what the markets will react to.

 

[copyright1997reloaded]

That’s correct, the annual unadjusted rate won’t change, just the seasonally adjusted ones. I do my recent 6 month calculations based on the unadjusted numbers via the inflationdata.com cumulative inflation calculator. However the seasonally adjusted month by month numbers are what drive the headlines, and thus what the markets will react to.

And there lies the issue in that the markets "liked" the thought that inflation was cooling quickly (i.e. the headlines were good) and now...well not so good. OTOH it might help us getting to 5% on the 6-month real soon now and the 1 & 2 year note yields have moved up quickly which makes it more appetizing (to me) for the next 1-year T-Bill auction (on 2/21/23).

 

[tulak]

Today’s T-bill auction results:

Bills	CMB	CUSIP	Issue Date	High Rate	Investment Rate	Price per $100
4-Week	No	912796Z69	02/14/2023	4.520%	4.599%	$99.648444
8-Week	No	912796CT4	02/14/2023	4.600%	4.698%	$99.284444
13-Week	No	912796ZE2	02/09/2023	4.590%	4.708%	$98.839750
17-Week	No	912797FN2	02/14/2023	4.700%	4.840%	$98.446389
26-Week	No	912796XY0	02/09/2023	4.755%	4.940%	$97.596083

Rates keep moving on up!

Is the Issue Date the same at the Settlement Date on the auction schedule from TreasuryDirect?

I had a 26 week expire this week and put in an order for the auction next week (2/13). This is from a 26 week treasury that I bought last August yielding 3.130%. Rates have gone up nicely since then!

Fingers crossed that we break 5% next week.

 

[audreyh1]

Is the Issue Date the same at the Settlement Date on the auction schedule from TreasuryDirect?

I had a 26 week expire this week and put in an order for the auction next week (2/13). This is from a 26 week treasury that I bought last August yielding 3.130%. Rates have gone up nicely since then!

Yes, the issue date and settlement date are the same.

At Fidelity you can buy (settle) a new treasury the same day the previous issue matures even though the auction is a few days prior. So you don’t have to wait for the next week if you don’t want to. This is what they do with auto roll.

 

[JoeWras]

The government needs some cash. So, they opened a CMB (essentially the same as a T-bill) with a term of 12-days.

This 12-day bill is available on Fidelity now, for auction on Monday.

Just FYI. Probably best to stick with the money market for such short term. This is more for institutions. However, for someone who wants real practice in buy at auction, this is a pretty low risk way to try.

 

[tulak]

Yes, the issue date and settlement date are the same.

At Fidelity you can buy (settle) a new treasury the same day the previous issue matures even though the auction is a few days prior. So you don’t have to wait for the next week if you don’t want to. This is what they do with auto roll.

I knew Fidelity has an auto roll feature, but I didn't know that's how it worked.

With Vanguard, I don't see a similar option. I'm going to look into it more, but this might be a good enough reason for me to move this account to Fidelity.

 

[audreyh1]

The main benefit of the auto roll feature is that you can leave it alone as it’s automatic. If you change your mind, call in and they will turn it off (or on) for any given treasury.

I mimicked it myself once as I was switching from 13 week to 26 week T-bill. I realized that they were auctioned as well as issued on the same days. So I went ahead and placed an auction for the 26 week for Monday, and the 13 week matured and covered the 26 week new issue which was settled the same day (the following Thursday).

I did have some funds in a MM account that would have covered it (but nothing in the core) but none of that was touched. The funds from the matured T-bill showed up first thing in the morning Thursday and covered the negative core balance from the auction. Sweet!

 

[jldavid47]

And there lies the issue in that the markets "liked" the thought that inflation was cooling quickly (i.e. the headlines were good) and now...well not so good. OTOH it might help us getting to 5% on the 6-month real soon now and the 1 & 2 year note yields have moved up quickly which makes it more appetizing (to me) for the next 1-year T-Bill auction (on 2/21/23).

Here's a quick view of how the yield curve has changed since the Fed spoke on 2/2. Biggest impact has been on the middle of the curve (2-7 years). Source:

https://home.treasury.gov/resource-...reasury_yield_curve&field_tdr_date_value=2023