Treasury Bills, Notes, and Bonds Discussion

[JoeWras]

View attachment 43455


Checking the https://www.treasurydirect.gov/instit/instit.htm?upcoming site I found this information. Some questions: how do they know the 9/13/22 4 week and 8 week rates if the auction doesn't settle till 9/15/22.

Also in the attached image why the different rates, High Rate and Investment Rate?

"Settle" or "Issue" is not the auction settling, it is when the treasury department and your broker finish the deal. The auction price happens within microseconds of the cutoff on the auction date.

"High Price" is the winning bid of the auction. Don't worry about it too much. There's a lot that math geeks can get from this when they drill down and see even more details about the winning auction. (For example, how much of the pot was bid at this rate. It shows just how on the edge the winning bid was.)

What you want is "Investment Rate". This is very close to what we would call annual yield. Math geeks will argue a few hundreths, but for all practical purposes you can compare this with CD rates.

 

[audreyh1]

View attachment 43455


Checking the https://www.treasurydirect.gov/instit/instit.htm?upcoming site I found this information. Some questions: how do they know the 9/13/22 4 week and 8 week rates if the auction doesn't settle till 9/15/22.

Also in the attached image why the different rates, High Rate and Investment Rate?

Those are the auction results. The auction occurs 2 or 3 business days before the settlement date. Monday auction settles on Thursday. Thursday auction settles on Tuesday. The auction for the 13-week and 26-week was on Monday 9/12 and settles tomorrow 9/15. The recent 4-week and 8-week auctions occurred last Thursday, and already settled yesterday.

If you look at the upcoming auctions tab you’ll see the dates listed for the next round.

 

[11522914]

Rates are moving up.[emoji16]

Today on Schwab you can buy brokerage Cds 4%+ on 18 month, 3 , 5 and 10 year. All callable though.

Nothing 4% on Treasuries yet. Highest is 3.94% on 1 year.

 

[MarieIG]

Hmmm, I'll probably nibble on the 26 week on the upcoming auction, but try to hold off on bigger purchase until after the next meeting.

 

[aja8888]

Hmmm, I'll probably nibble on the 26 week on the upcoming auction, but try to hold off on bigger purchase until after the next meeting.

Yes, that's where I am, waiting until after the next FED meeting and announcement of the FFR increase. The 26 week still looks attractive and I have some T bills maturing soon.

 

[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.

 

[MBSC]

I bought the 119-day (17-week/4-month) Cash Management Bill (3.642%) at the 11am auction today. At 9am and 2:15pm, the Fidelity secondary market Bid/Ask yields for similar maturities were 3.55%/3.47%.

The 17-week CMB will transition to regular T-Bill status in late October.

 

[audreyh1]

It becomes a 13 week t-bill?

 

[MBSC]

It becomes a 13 week t-bill?

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

Quarterly Refunding Statement of Assistant Secretary for Financial Markets Josh Frost:
As announced at the May quarterly refunding, Treasury plans to transition the 4-month (i.e.,17-week) CMB to benchmark status. During this transition, Treasury will continue to issue the 4-month CMB at a regular weekly cadence. Treasury anticipates that the first benchmark 4-month bill auction will be announced on October 18, 2022 and auctioned on October 19, 2022. As noted previously, Treasury intends to maintain the Tuesday settlement and maturity cycle for the 4-month benchmark bill.

Source: https://home.treasury.gov/news/press-releases/jy0908

 

[JoeWras]

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.

Me too.

The only way I can stay sane is via a ladder. I filled in the shorter term rungs first, and am raising the height (duration) as time goes on.

 

[jldavid47]

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]

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]

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]

+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]

+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]

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]

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]

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

Maybe.

 

[jldavid47]

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]

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.