Treasury Bills, Notes, and Bonds Discussion

[zd500]

Looks good. How did you calculate the nominal yield is over 8% ?

YTM of 3.32% + expected inflation of 5%. The latter is my estimate.

 

[zd500]

YTM of 3.32% + expected inflation of 5%. The latter is my estimate.

BTW, for the month of Nov, the unadjusted month-over-month CPI is -0.1%, annualized to -1.2%. So the nominal yield is only 2.12% during Jan 2023 (Nov 2022 CPI data is used in calculating the inflation adjustment for Jan 2023). Oh well ...

 

[pdxgal]

This has been a very enlightening thread, thanks OP for starting it.

How do you all keep track of the maturities, interest rates, etc of your various rungs and ladders?

 

[calmloki]

This has been a very enlightening thread, thanks OP for starting it.

How do you all keep track of the maturities, interest rates, etc of your various rungs and ladders?

We are pretty rigorous: a single 5x8 ruled sheet from a notepad under my desk blotter. It has columns for purchase date, duration (13, 26 week), maturity date, amount of bill, what we paid, and interest rate.

In Quicken in the investing center we record the purchase and cost in the appropriate account, with cusip, and I enter the interest earned at maturity with cusip using the maturity date, so a future transaction.

I suspect there are much better ways to do this..

 

[JoeWras]

We are pretty rigorous: a single 5x8 ruled sheet from a notepad under my desk blotter. It has columns for purchase date, duration (13, 26 week), maturity date, amount of bill, what we paid, and interest rate.

In Quicken in the investing center we record the purchase and cost in the appropriate account, with cusip, and I enter the interest earned at maturity with cusip using the maturity date, so a future transaction.

I suspect there are much better ways to do this..

If you enter the "Maturity" and "Callable" information on the bond/treasury/CD, it really helps with standard quicken reports. Here's one I use which I find very useful. I also name all my Tbills and Notes using a name with their effective interest rate - it helps see the situation at a glance.

 

[calmloki]

If you enter the "Maturity" and "Callable" information on the bond/treasury/CD, it really helps with standard quicken reports. Here's one I use which I find very useful. I also name all my Tbills and Notes using a name with their effective interest rate - it helps see the situation at a glance.

We don't have anything between portfolio value and investment transactions. No Maturity and Callable for bond and CD spot jumping out at me. All a cunning plan to get us away from our quill-and eye-shade era 2006 non-subscription Quicken version.

 

[grasshopper]

If you enter the "Maturity" and "Callable" information on the bond/treasury/CD, it really helps with standard quicken reports. Here's one I use which I find very useful. I also name all my Tbills and Notes using a name with their effective interest rate - it helps see the situation at a glance.

Quicken user for 25+ years and never looked/saw this report. Vanguard has something similar in bond/cd tools.

thanks. david

 

[sengsational]

Just bought some TIPS (9128284H0) maturing on 4/15/2023 with YTM 3.32%. With expected inflation at ~5% for the next 4 months, the nominal yield is over 8%. Thought that's extremely good as a short term bond with virtually no risk.

YTM of 3.32% + expected inflation of 5%. The latter is my estimate.

That issue is showing on Fidelity as 3.567% YTM now. I don't know the intricacies of how TIPS work or if Fidelity ignores or includes the expected inflation adjustment. It just seems that 8% is too good to be true, so there's probably something amiss.

Any TIPS people want to chime in?

 

[JoeWras]

We don't have anything between portfolio value and investment transactions. No Maturity and Callable for bond and CD spot jumping out at me. All a cunning plan to get us away from our quill-and eye-shade era 2006 non-subscription Quicken version.

Quicken user for 25+ years and never looked/saw this report. Vanguard has something similar in bond/cd tools.

thanks. david

Yes, VG and Fidelity have similar reports, automated. But what if you have both? I'm currently in the midst of getting away from VG so I have a bit of both. This report really helps.

And calmloki, it is fine if you want to stay with old Quicken. I hold no judgements. DYI with paper still works. Seriously. I honestly don't mind paying for Quicken. I also don't buy a car every 2 years. So that money saved goes to the subscription, and, uh, eating.

Here's a look at the short end of my TBill ladder, to give you an idea of what the report shows. Shares and value are truncated as that is private (they are to the right, not shown here). I hope someone out there finds this helpful. I'm really trying to help. If not, then bah humbug.

 

[zd500]

That issue is showing on Fidelity as 3.567% YTM now. I don't know the intricacies of how TIPS work or if Fidelity ignores or includes the expected inflation adjustment. It just seems that 8% is too good to be true, so there's probably something amiss.

I looked into it a bit further. The reported YTM is real yield. However I did miss one fact - The monthly inflation is usually at its lowest level in Q4 (oftentimes negative). For this particular bond maturing on 4/15/2023, the monthly inflation data for Nov, Dec, Jan and Feb are used in the calculation of the inflation adjustment. As such, the inflation adjustment is usually quite low. For TIPS of longer durations, this monthly variation can be ignored.

Historic monthly inflation data: https://inflationdata.com/Inflation/Inflation_Rate/Monthly_Inflation.aspx

 

[Golden sunsets]

I had a rung on my Treasury ladder at Fido mature on 12/13/22. I went in to reinvest the funds in a 12/23 rung, but there were no available secondary market Treasuries at amounts less than $100,000 and some minimums were much higher. Is this normal? I bought the ladder(12 rungs, one per month) in October and had numerous options to choose from in 25k per rung amounts.

 

[Happyras]

I had a rung on my Treasury ladder at Fido mature on 12/13/22. I went in to reinvest the funds in a 12/23 rung, but there were no available secondary market Treasuries at amounts less than $100,000 and some minimums were much higher. Is this normal? I bought the ladder(12 rungs, one per month) in October and had numerous options to choose from in 25k per rung amounts.

I tried to sell a t-bill maturing soon and had the same issue. Called the bond desk and they said that is normal for such short dated t-bills, I had to wait it out. It was nearly 250K but no market.

 

[Spock]

I tried to sell a t-bill maturing soon and had the same issue. Called the bond desk and they said that is normal for such short dated t-bills, I had to wait it out. It was nearly 250K but no market.

I sold one last week and it happened almost instantaneously as in funds were in my account and the CUSPID out of my positions list when the page refreshed.

I would think selling would be a breeze as everybody and their dog is buying them right now.

 

[Spock]

I had a rung on my Treasury ladder at Fido mature on 12/13/22. I went in to reinvest the funds in a 12/23 rung, but there were no available secondary market Treasuries at amounts less than $100,000 and some minimums were much higher. Is this normal? I bought the ladder(12 rungs, one per month) in October and had numerous options to choose from in 25k per rung amounts.

Bond inventory for CDs/Ts/GSEs is getting sucked up faster than a plate of spaghetti. The whales are taking the low coupons hoping for capital appreciation as rates drop. Retail is taking all the higher coupons before rates drop.

 

[daylatedollarshort]

That issue is showing on Fidelity as 3.567% YTM now. I don't know the intricacies of how TIPS work or if Fidelity ignores or includes the expected inflation adjustment. It just seems that 8% is too good to be true, so there's probably something amiss.

Any TIPS people want to chime in?

In general, TIPS real yields go up when people expect deflation, so with short term rates higher, that indicate general concerns about short term deflation. TIPS' principals adjust downward with deflation, so if you buy a 6 month TIPS on the secondary market with accumulated inflation, the principal might adjust downward prior to maturity and be redeemed for less than what you paid. Deflation on the principal will cut into that 3.567% real yield. Shorter terms TIPS on the secondary market are a bit of a gamble right now with a possible recession looming and the Fed's interest rate hikes kicking into gear.

The real yields on TIPS went up quite a bit, even the long term maturities, when we had deflation after the great recession. The deflation was short lived, but my 30 year TIPS with over 2% real yields live on. I also sold some at a nice profit when yields dropped, though in hindsight I sold too soon. I didn't know back then TIPS would have negative yields that TIPS bond funds would still be scooping them up. If we have another recession / deflationary period with high TIPS yields I will load up again with some to keep and some to sell when deflation concerns subside.

 

[calmloki]

Yes, VG and Fidelity have similar reports, automated. But what if you have both? I'm currently in the midst of getting away from VG so I have a bit of both. This report really helps.

And calmloki, it is fine if you want to stay with old Quicken. I hold no judgements. DYI with paper still works. Seriously. I honestly don't mind paying for Quicken. I also don't buy a car every 2 years. So that money saved goes to the subscription, and, uh, eating.

Here's a look at the short end of my TBill ladder, to give you an idea of what the report shows. Shares and value are truncated as that is private (they are to the right, not shown here). I hope someone out there finds this helpful. I'm really trying to help. If not, then bah humbug.

And you are being of help - caused me to go a-searching in our 2006 Quicken for something similar, and not finding it. What year Quicken are you using? Takes effort to change what is already set up, but we manually enter all our stock and bank transactions rather than having Quicken download them - don't even think our version will or it could screw up many years of history if it did. So we keep on maybe doing more work than necessary. For real though, many thanks - if we don't see the possibilities then we never change.

 

[pb4uski]

In general, TIPS real yields go up when people expect deflation, so with short term rates higher, that indicate general concerns about short term deflation. TIPS' principals adjust downward with deflation, so if you buy a 6 month TIPS on the secondary market with accumulated inflation, the principal might adjust downward prior to maturity and be redeemed for less than what you paid. Deflation on the principal will cut into that 3.567% real yield. Shorter terms TIPS on the secondary market are a bit of a gamble right now with a possible recession looming and the Fed's interest rate hikes kicking into gear. .

But wouldn't inflation have to be negative and not just lower in order for a downward principal adjustment? I'm skeptical well ever get that low but I guess it is possible.

Has it ever happened? If so, when?

 

[pdxgal]

Quicken user for 25+ years and never looked/saw this report.

thanks. david

+1! Up until ER last year I didn't invest much in individual bonds or CDs so this Quicken feature was off my radar. Same goes for the budgeting feature.

I ran the Quicken report @JoeWras mentioned, and lo and behold it worked! What's odd is that in the CD/Bond "edit" screen I don't see a place to enter the maturity date. It's included in the Security Name (along with the interest rate) that was downloaded from Fidelity. So Quicken must be deriving the date from that or some other datum provided in the background by Fidelity.

Ages ago when I last input a CD bought at my credit union I entered it manually. IIR Quicken had me create a new asset account for it. But maybe that was because I just had basic Quicken, not premium.

Lots of Quicken investing features I need to learn how to use

 

[jazz4cash]

This has been a very enlightening thread, thanks OP for starting it.

How do you all keep track of the maturities, interest rates, etc of your various rungs and ladders?

You’re welcome! It has exceeded my expectations and I have learned so much.

I use the Fidelity Fixed Income Analysis tool. It shows me everything I need to know automatically but It does not include outside assets (MYGA’s, CDs, ibonds, DW’s accounts). I use a simple excel spreadsheet with a chart which is a timeline on the x axis and principal on the y axis. I generally don’t bother adding the interest payments so it plots principal vs maturity date. I overlay indicators for FRA and RMDs.

 

[daylatedollarshort]

But wouldn't inflation have to be negative and not just lower in order for a downward principal adjustment? I'm skeptical well ever get that low but I guess it is possible.

Has it ever happened? If so, when?

Yes, there would need to be deflation to have the principal lowered. But remember TIPS are inflation adjusted daily, not annually, so you only need short term CPI deflation to have the principal adjusted downward, not annual, year over year deflation. That is the only reason I can think of why the short term real yields are so high right now compared to the 5 year rates. I don't usually buy short maturity TIPS on the secondary market so maybe someone else with more experience in that area can chime in on that.

This is what Wikipedia has to say about deflation - "Throughout the history of the United States, inflation has approached zero and dipped below for short periods of time. This was quite common in the 19th century, and in the 20th century until the permanent abandonment of the gold standard for theBretton Woods system in 1948. In the past 60 years, the United States has only experienced deflation two times; in 2009 with the Great Recession and in 2015, when the CPI barely broke below 0% at −0.1%".

Check out what happened to TIPS real yields in 2009 in the chart in this article - https://seekingalpha.com/article/4083257-real-yields-on-tips-are-key-must-watch-indicator. Last recession TIPS real yields went up significantly on deflation fears because they can lose principal with deflation. We may have another good buying opportunity if history repeats itself.

 

[jazz4cash]

I had a rung on my Treasury ladder at Fido mature on 12/13/22. I went in to reinvest the funds in a 12/23 rung, but there were no available secondary market Treasuries at amounts less than $100,000 and some minimums were much higher. Is this normal? I bought the ladder(12 rungs, one per month) in October and had numerous options to choose from in 25k per rung amounts.

Did you click the "depth of book" icon? The quotes shown on the main page are the lowest price/highest yield available for that particular issue. If you click "depth of book" you should see there are various lower minimum quantities available. The lower minimums are slightly higher price/lower yield. I've never seen a treasury that did not have a minimum of one bond available. I see a treasury that matures 12/15/23 with a minimum of one bond that yields 4.524. The best yield is 4.526 for a minimum of 500K

 

[JoeWras]

And you are being of help - caused me to go a-searching in our 2006 Quicken for something similar, and not finding it. What year Quicken are you using? Takes effort to change what is already set up, but we manually enter all our stock and bank transactions rather than having Quicken download them - don't even think our version will or it could screw up many years of history if it did. So we keep on maybe doing more work than necessary. For real though, many thanks - if we don't see the possibilities then we never change.

Thanks. Sorry, I didn't want to debate quicken versions.

Unfortunately, the version I'm using is the latest subscription model. I suspect this wasn't around in 2006.

 

[JoeWras]

I ran the Quicken report @JoeWras mentioned, and lo and behold it worked! What's odd is that in the CD/Bond "edit" screen I don't see a place to enter the maturity date. It's included in the Security Name (along with the interest rate) that was downloaded from Fidelity. So Quicken must be deriving the date from that or some other datum provided in the background by Fidelity.

Ages ago when I last input a CD bought at my credit union I entered it manually. IIR Quicken had me create a new asset account for it. But maybe that was because I just had basic Quicken, not premium.

Lots of Quicken investing features I need to learn how to use

I don't like putting credentials in, so I still do everything manually, including entering my bonds and treasuries. Gives me something to do.

I'm not surprised that the automatic link puts this data in.

Anyway, you should be able to edit it.

Try this, from the main screen top clickable topics:

Tools--> Security List --> Click actual security

Once the actual security is up, there are boxes of information on the left. You'll see "Security Details" and click "Edit Details". You can then change the call and maturity dates.

 

[Golden sunsets]

"Bond inventory for CDs/Ts/GSEs is getting sucked up faster than a plate of spaghetti. The whales are taking the low coupons hoping for capital appreciation as rates drop. Retail is taking all the higher coupons before rates drop."


Interesting. I ended up with an FHLB bond to fill the rung. Going forward I guess I'll have to use the 52 week auction process, if this continues.

Sent from my SM-T510 using Early Retirement Forum mobile app

 

[Golden sunsets]

Bond inventory for CDs/Ts/GSEs is getting sucked up faster than a plate of spaghetti. The whales are taking the low coupons hoping for capital appreciation as rates drop. Retail is taking all the higher coupons before rates drop.

Did you click the "depth of book" icon? The quotes shown on the main page are the lowest price/highest yield available for that particular issue. If you click "depth of book" you should see there are various lower minimum quantities available. The lower minimums are slightly higher price/lower yield. I've never seen a treasury that did not have a minimum of one bond available. I see a treasury that matures 12/15/23 with a minimum of one bond that yields 4.524. The best yield is 4.526 for a minimum of 500K

Hmm. I thought the max available and min in parentheses was the parameters I had to deal with. You are saying I can put in a higher bid on the depth of book page?

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