Bought my first individual bonds ever

[Fermion]

In prep for setting up a 72t I got the funds rolled over from 401K to a IRA at Fidelity.

I was going to buy TIPS for the bond portion (still may) but it is kind of really confusing right now what to buy on that. 5 year, 10 year? Do I want to buy something with a 0.125 coupon or a recent 10 year with a 0.625 coupon or does it really matter?

So I went with 200 (about $200,000) of 2 year treasury bonds paying 4.25%.

Status Filled at $100.089
Bond CUSIP 91282CFN6
Description UNITED STATES TREAS SER BH-2024 4.25000% 09/30/2024 NTS NOTE

Not as exciting as biotech though. I still want to purchase some TIPS when I figure out whats what.

[daylatedollarshort]

Quote:

Originally Posted by Fermion In prep for setting up a 72t I got the funds rolled over from 401K to a IRA at Fidelity. I was going to buy TIPS for the bond portion (still may) but it is kind of really confusing right now what to buy on that. 5 year, 10 year? Do I want to buy something with a 0.125 coupon or a recent 10 year with a 0.625 coupon or does it really matter? So I went with 200 (about $200,000) of 2 year treasury bonds paying 4.25%. Status Filled at $100.089 Bond CUSIP 91282CFN6 Description UNITED STATES TREAS SER BH-2024 4.25000% 09/30/2024 NTS NOTE Not as exciting as biotech though. I still want to purchase some TIPS when I figure out whats what.

It is simpler to put in an order for TIPS at a place like Fidelity when the auctions are coming up. Then you only have to decide on the number of bonds. Otherwise I get ADD looking at the secondary market screens for TIPS.

[53anddone]

Congrats! Sleep well at night with that purchase.

[VanWinkle]

Quote:

Originally Posted by Fermion In prep for setting up a 72t I got the funds rolled over from 401K to a IRA at Fidelity. I was going to buy TIPS for the bond portion (still may) but it is kind of really confusing right now what to buy on that. 5 year, 10 year? Do I want to buy something with a 0.125 coupon or a recent 10 year with a 0.625 coupon or does it really matter? So I went with 200 (about $200,000) of 2 year treasury bonds paying 4.25%. Status Filled at $100.089 Bond CUSIP 91282CFN6 Description UNITED STATES TREAS SER BH-2024 4.25000% 09/30/2024 NTS NOTE Not as exciting as biotech though. I still want to purchase some TIPS when I figure out whats what.

Would that mean you paid 200,178.00 for the 200,000.00 in treasuries?

[MarieIG]

Quote:

Originally Posted by Fermion In prep for setting up a 72t I got the funds rolled over from 401K to a IRA at Fidelity. I was going to buy TIPS for the bond portion (still may) but it is kind of really confusing right now what to buy on that. 5 year, 10 year? Do I want to buy something with a 0.125 coupon or a recent 10 year with a 0.625 coupon or does it really matter? So I went with 200 (about $200,000) of 2 year treasury bonds paying 4.25%. Status Filled at $100.089 Bond CUSIP 91282CFN6 Description UNITED STATES TREAS SER BH-2024 4.25000% 09/30/2024 NTS NOTE Not as exciting as biotech though. I still want to purchase some TIPS when I figure out whats what.

Nice choice.

[Fermion]

Quote:

Originally Posted by VanWinkle Would that mean you paid 200,178.00 for the 200,000.00 in treasuries?

Right. I bought them before the employment report so I guess there was more optimism for a slow in the rate increases. I did buy $75,000 more on Friday and got a better than par deal of 99.9 on those (so paid $74,925).

Overall, pretty close to the 4.25% yield I guess.

Would it be better in the future to wait for an auction? The 2 year notes are each month right? $275,000 earning 4.25% for 23 days until the next auction is $736 so maybe buying on the secondary market is not so bad if you pay less than that amount.

[Sunset]

OP - I'm wondering why you didn't buy the 3 yr treasuries coming up for auction at 4.347% (est).

Wondering if you think 2 yrs is better than 3 for locking up the money or some other reason?

[VanWinkle]

Quote:

Originally Posted by Fermion Right. I bought them before the employment report so I guess there was more optimism for a slow in the rate increases. I did buy $75,000 more on Friday and got a better than par deal of 99.9 on those (so paid $74,925). Overall, pretty close to the 4.25% yield I guess. Would it be better in the future to wait for an auction? The 2 year notes are each month right? $275,000 earning 4.25% for 23 days until the next auction is $736 so maybe buying on the secondary market is not so bad if you pay less than that amount.

Thanks Fermion for the info.

VW

[Fermion]

Quote:

Originally Posted by Sunset OP - I'm wondering why you didn't buy the 3 yr treasuries coming up for auction at 4.347% (est). Wondering if you think 2 yrs is better than 3 for locking up the money or some other reason?

Hmm, I didn't really look at those. That is a pretty good yield. I like the 2 year duration though for now.

[COcheesehead]

4.5% CDs at Fidelity right now.

[Lsbcal]

FWIW, I bought the 4/15/25 TIPS (about 2.5 yrs out) with a yield to maturity of 2.23%. Did not want to roll the dice on forward inflation.

[Fermion]

Quote:

Originally Posted by COcheesehead 4.5% CDs at Fidelity right now.

I don't see a fidelity 2 year CD for 4.5% coupon??

[Fermion]

Ah I do see the JP Morgan Chase 2 year CD at 4.5% coupon

But it is not call protected.

The best call protected CD (the 2 year treasury is call protected) is 4.35% coupon.

[COcheesehead]

Quote:

Originally Posted by Fermion I don't see a fidelity 2 year CD for 4.5% coupon??

I see it. See screen capture below.

[Fermion]

Quote:

Originally Posted by COcheesehead I see it. See screen capture below.

Yes, I found the CD on Fidelity site, but it is callable if that is a factor for anyone.

[COcheesehead]

Quote:

Originally Posted by Fermion Yes, I found the CD on Fidelity site, but it is callable if that is a factor for anyone.

In a rising rate environment, take the 4.5% for as long as they will pay. It’s likely to go the full duration.

[Accidental Retiree]

Quote:

Originally Posted by daylatedollarshort It is simpler to put in an order for TIPS at a place like Fidelity when the auctions are coming up. Then you only have to decide on the number of bonds. Otherwise I get ADD looking at the secondary market screens for TIPS.

DLDS, am I right in thinking TIPS belong in traditional IRAs because their interest is taxable?

And if so, might these TIPS also be good candidates for in-kind Roth conversions?

I haven’t purchased any yet but am considering doing so.

[Lsbcal]

Quote:

Originally Posted by Accidental Retiree DLDS, am I right in thinking TIPS belong in traditional IRAs because their interest is taxable? And if so, might these TIPS also be good candidates for in-kind Roth conversions? I haven’t purchased any yet but am considering doing so.

I don't know enough about taxation of "phantom income" attributed to TIPS in a taxable account. You can probably find articles discussing this.

I only buy TIPS in IRA and Roth accounts. I would guess you cannot just do an in kind move of TIPS from IRA to Roth. But if you own them in an IRA you could justify selling and then repurchasing in the Roth. You would then only pay the bid/ask spread if done quickly by your broker (like at Vanguard, no transaction fee). You would still then be getting about the same original yield to maturity as your original TIPS purchase.

[daylatedollarshort]

Quote:

Originally Posted by Accidental Retiree DLDS, am I right in thinking TIPS belong in traditional IRAs because their interest is taxable? And if so, might these TIPS also be good candidates for in-kind Roth conversions? I haven’t purchased any yet but am considering doing so.

We only have our TIPS in IRAs and 401Ks. When we rolled over our small business 401K to an IRA, Fidelity let us keep all our TIPS as is, which I think is what in kind means. We haven't done any Roths yet due to being on the ACA limits until recently. I think the same rules would apply, but you'd have to ask your brokerage about it.

[daylatedollarshort]

Accidental Retiree - I called Fidelity today to rollover a 401K that has some Treasuries in the brokerage account. The rep told me whether I can do an in kind transfer to an IRA rollover depends on the plan specifics. However my plan didn't address that so they are going to have to research whether I can do it or not. If I can't do the in kind transfer, I will just do as Lbscal described, rebuy and be out the bid / ask difference, which is less than than what I'm losing by not being able to invest in TIPS and Treasuries right now with the rest of the money. (This plan shut down additional transfers to my brokerage account and their approved funds are mostly money losers, except for the low yield SV.)