Building a ladder.

[Jerry1]

I’m thinking about building a ladder using Treasury Notes/Bills. My general thought is to buy a 3, 6, 9 and 12 month duration and then as each matures buying a 12 month to replace it. Basically setting up a ladder that matures quarterly. However, in reading some of the threads on fixed income recently it seems there are those that are buying every week or couple weeks.

My question is, what is your framework for your ladder(s). What kind of rungs do you have and what’s your goal in doing so. Trying to see if I’m missing something before I start my foray into owning actual bond versus a bond fund. At this point, I don’t think I’d want to go any longer than one year for duration.

 

[njhowie]

Buying every week is likely a waste of your time and quarterly will likely be sufficient for what you're trying to accomplish.

 

[euro]

Buying every week is likely a waste of your time and quarterly will likely be sufficient for what you're trying to accomplish.

Agree! In fact, for my own purposes, I'd probably go with 6 or even 12 month rungs.

 

[calmloki]

Y'all are so regimented! I look for the best opportunity at the moment and just try and balance any hoped for superior future offered income product against what our cash is making now or could make if we pull the trigger on the deal du jour. I'd sorta like to have a ladder and know that every three months it was time to buy again, but it's not me.

We bought some 26 week T-bills on the 19th, then broke our GTE 3% CD and now have a large amount of cash making 3.25% at Marcus until February. See that an order for four times as much as we bought on the 19th just executed on 10/3 for $98.05 - so about 3.977%? In a few weeks maybe we'll buy some more, or maybe not - depends on the deals floating around at that time

 

[Finance Dave]

For me even monthly is too often. I have ours set up with annual CDs but staggered purchases every 6 months, so we have to do something only twice a year. Some may need more liquidity/flexibility than that, but it works for us. We keep 1 year of spending in a MM account for any needs we may have.

 

[Freedom56]

Depending on the size of your holdings and how much cash is coming in monthly, at some point it becomes a bi-weekly to monthly task. Last year my coupon payments and maturities would sit in a money market paying next to nothing waiting for higher yields. Now it has become a daily to weekly management affair with so many options to lock in higher yields. The sweet spot in yields is currently 1-3 years out.

 

[big-papa]

It really depends on what you're trying to accomplish. I have some money set aside for some home improvement projects after I retire in a few months. My high yield checking account is only "high yield" for the portion under $10K. So I have two 4 week T-bills, offset by 2 weeks, with auto roll set up. I went with 4 weeks because my actual retirement date isn't 100% known. So, for me, just a way to lose less to inflation while I'm waiting.

Cheers
Big-Papa

 

[Rianne]

Depending on how much is in each rung of the ladder, we typically go from 12 months, 2 years, or 5 years. For planning, we can see the dates due, and decide to re-invest, cash out or buy another fund.

 

[COcheesehead]

I built mine to match liabilities which is producing 100% of my income until I reach 70. So my rungs go out 10 years. I have bonds roll off every month or two and I buy at the long end. I have more than doubled my yield this year and our income is now about 130% of what we need. I also have sold some low yielders and flipped them into higher interest bonds. My taxable ladder yields just under 6% and my muni ladder in my taxable account yields in the mid 4’s. It a big game for me. I enjoy the hunt and have little fear of going long because for me it’s all about the income.

 

[Chuckanut]

My first bond ladder from earlier this year now has its first 4%+ CD.

Beats the heck out of a much older 0.6% CD that matured a few months ago.

 

[Gumby]

Ideally, I'd like to have a ladder with 8 rungs - 2 year notes/CDs maturing every quarter, but I'm a long way from being there.

 

[pletal]

My first bond ladder from earlier this year now has its first 4%+ CD.

Beats the heck out of a much older 0.6% CD that matured a few months ago.

Yes it does, and congrats