Treasury Bills, Notes, and Bonds Discussion

[jldavid47]

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Originally Posted by Chuckanut I’m using a ladder approach so I can catch higher rates today while also keeping my options open for higher rates in the future. Currently I anticipate rates to nudge up for about a year. When I think the increases are done or near done I’ll extend my maturity to several years or more.

+1

While this may seem excessive to many, I've laddered 28 Treasury securities maturing over the next 12 months. Half of them mature by the end of January so I'm purposely front-loaded in time. As each one matures I "fill in a blank" further down the maturity stream. I'm not really bothered about maybe doing better by waiting.

[Graybeard]

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Originally Posted by jldavid47 How lucky would you consider yourself if the S&P 500 hit 3100?

I'd be buying on the way down to 3100, not happy about that but it will pay off.

[audreyh1]

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Originally Posted by MBSC They are creating a 17-week T-bill. The CMB is the test drive before the launch.

Thanks much. That’s all very interesting. A 17 week T-bill may be a useful duration while waiting for rates to rise.

[JoeWras]

Quote:

Originally Posted by jldavid47 +1 While this may seem excessive to many, I've laddered 28 Treasury securities maturing over the next 12 months. Half of them mature by the end of January so I'm purposely front-loaded in time. As each one matures I "fill in a blank" further down the maturity stream. I'm not really bothered about maybe doing better by waiting.

I don't think so. I don't have quite that many rungs, but I have a lot, and I'm front loaded, and slowly stretching out the rungs as time goes on (less front loading).

[11522914]

Quote:

Originally Posted by jldavid47 +1 While this may seem excessive to many, I've laddered 28 Treasury securities maturing over the next 12 months. Half of them mature by the end of January so I'm purposely front-loaded in time. As each one matures I "fill in a blank" further down the maturity stream. I'm not really bothered about maybe doing better by waiting.

Good idea. I'll start building a one year ladder after the next Fed meeting and will slowly extend maturity.

I'm also waiting for some end of year corporate bond and preferred stock selling.

[Montecfo]

This waiting till the next Fed meeting leads to, well, waiting for the subsequent Fed meeting which leads to under-earning idle cash which does not get deployed until, gads!, Fed policy turns "neutral" again and you are investing at lower rates.

Laddering is the way to go.

[disneysteve]

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Originally Posted by Montecfo This waiting till the next Fed meeting leads to, well, waiting for the subsequent Fed meeting which leads to under-earning idle cash which does not get deployed until, gads!, Fed policy turns "neutral" again and you are investing at lower rates. Laddering is the way to go.

Exactly. I bought 3 and 6 month bills on Monday, moving money from earning 2.1 to now earning over 3.1 and 3.5. Sure it will go higher, and it did the very next day, but that's always the risk. The flip side of that risk is leaving it at 2.1.


The good news is that's not all of our money. We have a T bill maturing today in fact. And even that money will be back in play in 3 months and 6 months, along with everything else that matures between now and then.



Never let the perfect be the enemy of the good.

[Midpack]

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Originally Posted by disneysteve Exactly. I bought 3 and 6 month bills on Monday, moving money from earning 2.1 to now earning over 3.1 and 3.5. Sure it will go higher, and it did the very next day, but that's always the risk. The flip side of that risk is leaving it at 2.1. The good news is that's not all of our money. We have a T bill maturing today in fact. And even that money will be back in play in 3 months and 6 months, along with everything else that matures between now and then. Never let the perfect be the enemy of the good.

+1. Same here. I’m doing 13 and 26 week bills for now. I’ll go longer when rates stabilize, maybe ladder. For now I’m getting better returns than cash or bond funds with no downside to speak of.

[audreyh1]

The 1-year T-bill kissed 4% this morning.

[jazz4cash]

I have a Tbill maturing today 9/15/22 at Fidelity. As of 10am the principal and interest are in the settlement account. Interest is a separate line item. That seems fine to me!
Maybe I can catch one of those 1yr bills at 4%

EDIT: It's at 3.969 right now so why wait?

[jazz4cash]

WOW. Just spent 30 min on the phone with Fido trying to place a small order for 1yr tbill. When I tried to place the order the system was ignoring my selection from the depth of book page. I called the Fixed Income Desk (800-476-4589) for help. The wait time was just a few minutes. They walked me through the process but the system would not take the order. After 25 minutes with a back office supervisor, they had to place the order on thier "other" system and waived the fee. He said I was doing everything correctly but sometimes the system doesn't handle small orders very well. I am very disappointed but hopefully this will be a one off. YTM ~3.96

[jldavid47]

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Originally Posted by Graybeard I'd be buying on the way down to 3100, not happy about that but it will pay off.

Maybe.

[jldavid47]

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Originally Posted by Montecfo This waiting till the next Fed meeting leads to, well, waiting for the subsequent Fed meeting which leads to under-earning idle cash which does not get deployed until, gads!, Fed policy turns "neutral" again and you are investing at lower rates. Laddering is the way to go.

Yup. The "under-earning idle cash" thing is one reason why I've been deploying bit by bit (laddering) over time and not waiting. I started slowly in late February and really started gearing up in June. Rates not only would have to catch up to what I got but would have to exceed the rate I got for a long enough period to offset the "lost" income by waiting.

I "know" rates are in an uptrend. The problem is what you think you know can cost you a lot of money over time because guess what? You (and I) could be wrong. Mr. Market doesn't care what we think we know. Laddering now helps mitigate uncertainty.

[ITTN]

While we continue to look for the perfect house the money for the new home (a cash purchase) is currently in savings accounts (@2%) , no penalty CDs (@2%) and 4 week T bills (@2.5%). How risky would it be to put this money into longer term treasuries (1 - 2 years) and then when we find the perfect house (hopefully soon) sell the treasuries in the secondary market ?

[jldavid47]

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Originally Posted by ITTN How risky would it be to put this money into longer term treasuries (1 - 2 years) and then when we find the perfect house (hopefully soon) sell the treasuries in the secondary market ?

It would only be risky if there was a sharp rise in 1-2 year yields in the time frame from the time you purchased them to the time you wanted to sell. In that circumstance there is a chance you could be selling at a small loss. (I'm assuming that's what you mean by "risky")

Here's a personal example. I bought the 52 week T-Bill maturing on 9/7/23 at auction and paid 96.5016 per $100. Currently, the market price of that T-Bill is 96.2416 as 1-year rates have increased sharply over the past week. If I sold today I would realize a loss of $0.26 per $100. Even the 52 week T-Bills I bought in March are still showing a slight loss 6 months later. (For me this isn't a problem as I intend to hold to maturity).

Since you are thinking that the perfect house will come your way sooner rather than later you might want to keep up your current strategy and take the slightly lower rate. Liquidity of 52 week T-Bills isn't a problem. A slight loss of principal in the short run could be.

[Done]

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Originally Posted by jazz4cash The system was ignoring my selection from the depth of book page.

I am new to purchasing T-bills so I thought it was just me. In Fido, the top yielding secondary 52-week was showing a minimum order of 200 (~$200k) and I wanted less so I figured I could go to the depth of book and find an ask with a smaller minimum order. I chose one and entered a bid. The confirmation page still showed the original 200 minimum but the smaller order did go through and was later filled. I’m not sure this is the way it always displays, but it was confusing to me.

[ITTN]

Quote:

Originally Posted by jldavid47 It would only be risky if there was a sharp rise in 1-2 year yields in the time frame from the time you purchased them to the time you wanted to sell. In that circumstance there is a chance you could be selling at a small loss. (I'm assuming that's what you mean by "risky") Here's a personal example. I bought the 52 week T-Bill maturing on 9/7/23 at auction and paid 96.5016 per $100. Currently, the market price of that T-Bill is 96.2416 as 1-year rates have increased sharply over the past week. If I sold today I would realize a loss of $0.26 per $100. Even the 52 week T-Bills I bought in March are still showing a slight loss 6 months later. (For me this isn't a problem as I intend to hold to maturity). Since you are thinking that the perfect house will come your way sooner rather than later you might want to keep up your current strategy and take the slightly lower rate. Liquidity of 52 week T-Bills isn't a problem. A slight loss of principal in the short run could be.

Thank you jldavid47, your answer, and example were most helpful. I'll be staying with my current strategy.

[jazz4cash]

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Originally Posted by Done I am new to purchasing T-bills so I thought it was just me. In Fido, the top yielding secondary 52-week was showing a minimum order of 200 (~$200k) and I wanted less so I figured I could go to the depth of book and find an ask with a smaller minimum order. I chose one and entered a bid. The confirmation page still showed the original 200 minimum but the smaller order did go through and was later filled. I’m not sure this is the way it always displays, but it was confusing to me.

I think I have experienced that also, but this time order did not go through and I got an error message (order less than minimum).

How did you enter the bid? I selected the “buy” button on the line next to the smaller minimum. If I get stuck again I’ll try entering the limit price manually and maybe even raise it a few tenths. I don’t think I’ll ever have orders >25k.

[Done]

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Originally Posted by jazz4cash How did you enter the bid? I selected the “buy” button on the line next to the smaller minimum.

Yes, I click the buy button on the depth of book screen, which prefills the corresponding limit price. If you lower the limit it may not work because that would require a higher minimum order. It’s also possible that those bonds are already sold when you complete the steps. In that case, return to the depth of book and try again.

[jazz4cash]

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Originally Posted by Done Yes, I click the buy button on the depth of book screen, which prefills the corresponding limit price. If you lower the limit it may not work because that would require a higher minimum order. It’s also possible that those bonds are already sold when you complete the steps. In that case, return to the depth of book and try again.

Got it. I was thinking to RAISE the limit price by a few hundredths. The markets are live I guess and the numbers on the screen are changing constantly.