Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Treasuries - New or Market?
Old 11-27-2023, 08:14 PM   #1
Thinks s/he gets paid by the post
 
Join Date: Jan 2011
Location: Fair Lawn
Posts: 2,925
Treasuries - New or Market?

Is there any advantage to buying a Treasure on the market, vs a new issue, or vice versa?
mystang52 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-27-2023, 09:09 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,783
It comes down to personal preference/investing style.

Overall it’s probably a wash. It depends on how much time you want to spend looking for good deals on the secondary market versus a more set it and forget it type approach with using the auction.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 11-28-2023, 03:40 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
JoeWras's Avatar
 
Join Date: Sep 2012
Posts: 11,701
If you buy new at auction and hold to maturity, your tax calculation will be extremely simple, just like a CD.

If you buy secondary, and/or sell early, you will have more tax tasks and may get more forms or more boxes filled on the 1099-INT. This is generally not a huge deal, but it can get a bit confusing.
__________________
Retired Class of 2018


JoeWras is offline   Reply With Quote
Old 11-28-2023, 05:09 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: NC
Posts: 21,099
The return is about a wash but there is a difference…
Quote:
Originally Posted by Fidelity
Interest income from Treasury bonds is exempt from state and local income taxes, but subject to federal income taxes. There may also be tax consequences when you sell Treasurys that you bought on the secondary market. If you buy a bond for less than face value on the secondary market and either hold it until maturity or sell it at a profit, the gain will be subject to federal and state taxes. This is different than buying a Treasury bill at Original Issue Discount (OID). When a bond is sold or matures, gains resulting from purchasing a bond at a discount in the secondary market are treated as capital gains while OID gains are taxed as income.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 11-28-2023, 06:19 AM   #5
Thinks s/he gets paid by the post
njhowie's Avatar
 
Join Date: Mar 2012
Posts: 3,907
Quote:
Originally Posted by JoeWras View Post
If you buy secondary, and/or sell early, you will have more tax tasks and may get more forms or more boxes filled on the 1099-INT. This is generally not a huge deal, but it can get a bit confusing.
Fidelity, or whoever your broker is takes care of it all. You do the import from within your tax software and that's it - no confusion, no additional tasks, no different than your normal process of importing your 1099s.

However, there are a number of advantages to purchasing in the secondary market vs. auction.

1. When you buy at auction, like new issue CDs, you're generally placing your order in advance of the issue date. Rates may change between the time you place your order and the time of auction, and the yield you get will adjust accordingly. Unlike CDs where the rate you get will not change between the time you place your order and when it's issued. With secondary, you place the order you own it immediately and know everything.

2. You have many, many more maturities available. On any particular auction date there are a few (generally 5 or less) maturities being sold. In the secondary market, you have hundreds to choose from every day of the week - as short or long a maturity as you want.

3. Though the market is generally efficient, it's not always the case, and you could do a little better by purchasing in the secondary market.
njhowie is offline   Reply With Quote
Old 11-28-2023, 07:01 AM   #6
Full time employment: Posting here.
jldavid47's Avatar
 
Join Date: Mar 2019
Posts: 740
You usually do slightly better if you buy at auction because you don't lose the bid/ask spread.
jldavid47 is offline   Reply With Quote
Old 11-29-2023, 06:47 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Aug 2016
Location: Northern Virginia
Posts: 7,486
Quote:
Originally Posted by njhowie View Post
Fidelity, or whoever your broker is takes care of it all. You do the import from within your tax software and that's it - no confusion, no additional tasks, no different than your normal process of importing your 1099s.
I prefer the secondary market. But I have found that prepaid interest (which should offset reported interest) is not included in 1099 reporting, at least for my broker. So you have to make sure and capture that as an offset or you will overpay taxes.
Montecfo is offline   Reply With Quote
Old 11-29-2023, 06:51 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Aug 2016
Location: Northern Virginia
Posts: 7,486
Quote:
Originally Posted by jldavid47 View Post
You usually do slightly better if you buy at auction because you don't lose the bid/ask spread.
How so? Treasuries are offered at an "ask" price. You can't turn around and sell at the same price.

I guess you mean this in theory.
Montecfo is offline   Reply With Quote
Old 12-19-2023, 04:23 PM   #9
Thinks s/he gets paid by the post
njhowie's Avatar
 
Join Date: Mar 2012
Posts: 3,907
Quote:
Originally Posted by Montecfo View Post
I prefer the secondary market. But I have found that prepaid interest (which should offset reported interest) is not included in 1099 reporting, at least for my broker. So you have to make sure and capture that as an offset or you will overpay taxes.
I double-checked this using my info from Fidelity because someone on this site indicated a while back they did not. I can confirm that Fidelity does in fact report prepaid interest properly on the 1099 - both the print version as well as the datalink/import to your tax software (Turbotax for certain).
njhowie is offline   Reply With Quote
Old 12-19-2023, 08:22 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,291
Quote:
Originally Posted by njhowie View Post
I double-checked this using my info from Fidelity because someone on this site indicated a while back they did not. I can confirm that Fidelity does in fact report prepaid interest properly on the 1099 - both the print version as well as the datalink/import to your tax software (Turbotax for certain).
I think that may have been me. I recall stumbling on the issue and having to work around the problem. Where is the pre-paid interest reported on the 1099 or does the amount reported exclude prepaid interest?

Looking at last year’s 1099 from Fido I have a note on the last page of the doc titled ‘Tax Summary-Not Reported to IRS’. It lists an amount for ‘accrued interest paid on purchases’. I don’t want to derail but I need to flesh this out.
jazz4cash is offline   Reply With Quote
Old 12-19-2023, 09:37 PM   #11
Recycles dryer sheets
 
Join Date: Apr 2016
Posts: 93
Quote:
Originally Posted by mystang52 View Post
Is there any advantage to buying a Treasure on the market, vs a new issue, or vice versa?
I'm still learning about it all but today I found out (nothing surprising to experienced people but was new to me), that despite the 20 yr bond being listed in the 'New Issue' tab (on Fidelity website), that tomorrow it is just a "re-issue" and that means the coupon is for sure what it was last month, but the price will be the market price (apparently same as would be on the secondary market just less by a teensy amount).

I am up on the computer now because I just can't decide whether I want to buy any or not -- I'm not sure what time tomorrow it goes off the website, but I get up so late in the morning (yay retirement!) tonight is my last chance to decide.
UpQuark is offline   Reply With Quote
Old 12-19-2023, 09:49 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,783
With a 4 3/4% coupon it will sell at a premium.

Looks like recent trade has yield of 4.23%?
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 12-19-2023, 10:19 PM   #13
Recycles dryer sheets
 
Join Date: Apr 2016
Posts: 93
Quote:
Originally Posted by audreyh1 View Post
With a 4 3/4% coupon it will sell at a premium.

Looks like recent trade has yield of 4.23%?
Yes it looks like the price will be quite a bit above par (hope I'm using the terminology correctly).

So I just don't know what to do. Both people on YouTube and Fidelity fixed income people think DCA'ing in is a workable strategy for long durations right now because (apparently) there are many different factors that affect the long duration yields and I guess they are expected to go up and down, at least for the next several months.
UpQuark is offline   Reply With Quote
Old 12-19-2023, 10:21 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,783
It’s out of my league, I don’t do anything longer than 5 yrs.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Treasuries vs. Corporate Bonds vs. Money Market free4now FIRE and Money 23 10-23-2009 07:58 PM
Anyone sell individual Treasuries or TIPS? Especially at Fido. lazyday FIRE and Money 2 02-15-2006 10:40 PM
Laddering- CD's vs Treasuries Gearhead Jim FIRE and Money 14 08-31-2005 03:48 PM
Govt to restart selling 30 year treasuries cute fuzzy bunny FIRE and Money 16 05-04-2005 08:52 PM

» Quick Links

 
All times are GMT -6. The time now is 12:34 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.