Treasury Bills, Notes, and Bonds Discussion

[pb4uski]

I was looking at the Treasury web page auction results and saw that for the 10, 20 and 30 year the price per $100 was like $104 or $107, with the interest rate 4%.

What is the deal with that? If I pay $104 for $100 of the 20 year bond am I losing the first year of interest?

No, you are losing $4 over the 20-year term of the bond or 50c/year. So the cash flows are -$104 at purchase, then the $2 interest payments every 6 months for 20 years and then +$100 at maturity.... or a YTM of around 3.71% I think.

 

[audreyh1]

I've been waiting for the 52 week T bill and today is the day yet at Vanguard it is not even listed. This was just a few minutes ago. Anyone know why?

You’ve got time. It’s auctioned next week. Check tomorrow.

 

[Graybeard]

You’ve got time. It’s auctioned next week. Check tomorrow.

True but they always show up on time so I wondered if they were not going to do a 52 week auction for whatever reason. Been waiting weeks for this and would be unhappy if I had to wait another month.

 

[Graybeard]

And we have this week’s T-bill auction results:

Bills	CMB	CUSIP	Issue Date	High Rate	Investment Rate	Price per $100
4-Week	No	912796Y60	01/24/2023	4.480%	4.558%	$99.651556
8-Week	No	912796Z77	01/24/2023	4.520%	4.615%	$99.296889
13-Week	No	912796V48	01/19/2023	4.560%	4.677%	$98.847333
17-Week	No	912797FF9	01/24/2023	4.610%	4.746%	$98.476139
26-Week	No	912796ZZ5	01/19/2023	4.685%	4.865%	$97.631472

Looks like the shortest durations keep moving up sharply. Graybeard got 4.558% on his 4 week.

Last week’s auction results. https://www.early-retirement.org/fo...d-bonds-discussion-115186-61.html#post2880677

Wow the 4 week bill was much higher than expected, glad I bought some.

 

[JoeWras]

True but they always show up on time so I wondered if they were not going to do a 52 week auction for whatever reason. Been waiting weeks for this and would be unhappy if I had to wait another month.

Just more Vanguard issues (see other threads).

It has been available on Fidelity since about 1pm EST.

 

[copyright1997reloaded]

Wow the 4 week bill was much higher than expected, glad I bought some.

yep, I grabbed some of that 4-week paper myself using money moved from Ally.

 

[audreyh1]

26 week rate same as last week and 13week T-bill just slightly higher.

I’m getting ready to order my first 17 week tomorrow. I need it to implement my June-Dec-June 26-week T-bill pattern. The 17 week will bridge me to first week of June.

I’m laddering a set of 6 month T-bills so one set matures first week of every other month.

 

[joesxm3]

Thanks.

I was starting to wonder if I should stop buying every week and lump them into monthly or semi a monthly amount to have less to keep track of.

I have been studying asset location strategies and think that I will figure out how much of my TV bills are my bond allocation and how much is just cash at a better rate. I will rotate the bond allocation part into my TIRA. However my I-Bond collection might be close to my desired bond allocation I shall have to see.

Another thing I am trying to figure out is T-Bills in IRA to delay federal tax versus in taxable to avoid paying state tax. My state is phasing in no tax on IRA for AGI less than $75k but I don't think I can stay below thst.

Plus in 2030 when my I-Bonds mature I will be hit with a huge tax torpedo. I am trying to calculate if cashing some early helps, but it is seeming that the lost interest is more than the tax savings.

 

[JoeWras]

For better or worst, I'm going with a 52 week for tomorrow. Results should be interesting.

Last month was 4.741%. Market says it will be close... may a few bp lower. We shall see.

I'm going to guess secondary market players hate our auction talk when we speculate on our "prize." Ha ha.

 

[audreyh1]

Thanks.

I was starting to wonder if I should stop buying every week and lump them into monthly or semi a monthly amount to have less to keep track of.

This totally depends on your goals for the money. In this particular case I’m managing short-term funds that I prefer to keep somewhat liquid. The two month staggered 6 month laddering is convenient at this point. I’ve converged on first week of the month issues because it makes it easier to synchronize. I’m not trying to maximize anything.

I haven’t bothered with any T-bills shorter than 3 months.

 

[jldavid47]

For better or worst, I'm going with a 52 week for tomorrow. Results should be interesting.

Last month was 4.741%. Market says it will be close... may a few bp lower. We shall see.

I'm going to guess secondary market players hate our auction talk when we speculate on our "prize." Ha ha.

I'm also getting into the 52 week auction tomorrow. Picked up my allocation in the 26 week today. I'm just plodding along following my plan.

I've found that recently I've been doing better by buying at auction than in the secondary market. It is at least partially due to the fact that at auction I don't lose the bid/ask spread.

 

[Happyras]

I keep looking at those new issue Agency bonds, llke;
FEDERAL FARM CR BKS BOND
5.65000% 01/24/2031

Sure it is callable on the first coupon of July this year, but the coupon is 5.65%, maybe you get lucky and goes longer term, but why would one not buy these and consider it as a 6 month bond? I did buy some a bit ago at 6.5% coupon, but callable in May.

I do not see why these would not be as safe as a t-bill, but with much higher yield. Help me understand why this would not be a short term play?

 

[Graybeard]

Bought some 26 week T bills today and tomorrow I'll buy my first 52 week T bills.

 

[phil1ben]

I keep looking at those new issue Agency bonds, llke;
FEDERAL FARM CR BKS BOND
5.65000% 01/24/2031

Sure it is callable on the first coupon of July this year, but the coupon is 5.65%, maybe you get lucky and goes longer term, but why would one not buy these and consider it as a 6 month bond? I did buy some a bit ago at 6.5% coupon, but callable in May.

I do not see why these would not be as safe as a t-bill, but with much higher yield. Help me understand why this would not be a short term play?

I also have been buying these along with 6 month zero coupons on the Schwab platform. Also using SCOXX as a money market liquid account paying 4.17% as of today. 25 bps lower than SNAXX but I like the holdings better.

 

[JoeWras]

And there it is.

52 week bill comes in at 4.692% down from 4.741% from last month.

 

[jldavid47]

And there it is.

52 week bill comes in at 4.692% down from 4.741% from last month.

I'm still pretty happy with that. I'm glad I skipped the 2-year auction this month, however. The yield dropped from 4.373% last month to 4.139% in yesterday's auction. Even SWVXX is paying 4.27% right now and that will likely go up after the next Fed meeting.

 

[audreyh1]

I have my order in for the 17-week auction today. We’ll see if it stays above 4.75%.

ETA: yes, came in near my expectation 4.757%, just a smidge above last week.

 

[jldavid47]

I'm glad I skipped the 2-year auction this month, however. The yield dropped from 4.373% last month to 4.139% in yesterday's auction.

FWIW, if I wanted to lengthen to 2 years right now there are plenty of non-callable brokered CDs at Schwab paying 4.5%. That's 36 basis points better than a 2-year T-Note.

 

[MarieIG]

I toyed with buying a 17 week in my IRA, but decided just to take the divvies from the settlement fund at the end of the month and roll it into my Roth. I'll reconsider in a week or two.

I have a T bill coming due in my house account, and am looking at putting in an order for a 13 week tomorrow.

I am letting a few smaller T bills in my taxable account mature (sticking them in a money market temporarily) to lump them together in a larger bill. I am then going to have to decide on their maturity.

After the next smaller bond matures, "anybody else" who matures this year is going to have to contribute a portion of their interest earnings to the tax account.

 

[Graybeard]

When a T bill that was bought in 2022 matures in 2023, I assume the interest is taxable (federal level) in the year it matured ie 2023 in this example?

It doesn't make sense that some of the interest that was earned in 2022 is taxable in 2022 and the interest earned in 2023 is taxable in 2023. Seems CD interest was taxed in each year that is why I am asking.

 

[audreyh1]

When a T bill that was bought in 2022 matures in 2023, I assume the interest is taxable (federal level) in the year it matured ie 2023 in this example?

It doesn't make sense that some of the interest that was earned in 2022 is taxable in 2022 and the interest earned in 2023 is taxable in 2023. Seems CD interest was taxed in each year that is why I am asking.

Yes, the interest is paid to you in 2023 and taxable that year. No funny business.

Generally it’s related to duration. 12 months or less it can be the one time interest payment. Longer than 12 months and CDs will pay interest in Dec if they haven’t already paid that year.

Even if the interest payment is kept within the CD, you still owe tax on the interest.

 

[JoeWras]

As long as you hold it to maturity, yes.

 

[jazz4cash]

It doesn't make sense that some of the interest that was earned in 2022 is taxable in 2022 and the interest earned in 2023 is taxable in 2023. Seems CD interest was taxed in each year that is why I am asking.

Think of it this way…..income is in the year it is received, including interest income. If you had to pay tax on interest not yet received, it could be a hardship to come up with funds to pay the taxes.

 

[audreyh1]

I think there are some situations in which there is “imputed interest” that hasn’t actually been paid, but fortunately not with your regular T-bills or CDs.

 

[ShokWaveRider]

Saw Suzie Orman today on Morning TV touting short term treasuries, 3 months in particular. She says rates are still going up and that one should not lock in too long.