Can't understand Tbill math (Fidelity). Need help.

[Purslane]

Jan 16- March 18 = 15 + 28+ 17 days = 60 days of interest payments.

$215,000.00 - $213,583.63 = $1,416.37 or $23.61/day of interest due.

Annualized this would equal $23.61 x 365 = $8,616.25 which would equal 4.00755% yearly interest on my $215k investment.

I thought I was supposed to get 4.293%. on the T bill.

Currently 7-day yield is 4.01% in MM account, which is essentially equivalent to the actual bond return. This means the only real advantage of the Tbill is not having to pay high California state tax on the returns, which is still a plus. But I don’t like playing with things I don’t understand, even if the risk is low. Can someone please tell me how I should be calculating this and/or if I am looking at these Tbills all wrong?

 

[QG67PK00]

I thought I was supposed to get 4.293%. on the T bill.

The rate of 4.293% applies only to the ask price of 99.300. You paid more (99.3412).
edited a typo..

 

[QG67PK00]

OP,
It looks like you bought this in the auction today. There was a new 8 week t-bill auctioned today and its price of 99.41222 exactly matches your total price of $213,583.63 for par value of $215,000.
The quote you see with ask price of 99.300 is for a secondary market quote of a 17 week t-bill auctioned in November with same CUSIP number as the new 8-week t-bill auctioned today.

 

[Purslane]

OP,
It looks like you bought this in the auction today. There was a new 8 week t-bill auctioned today and its price of 99.41222 exactly matches your total price of $213,583.63 for par value of $215,000.
The quote you see with ask price of 99.300 is for a secondary market quote of a 17 week t-bill auctioned in November with same CUSIP number as the new 8-week t-bill auctioned today.

I was trying to buy a new 8 week t-bill. So that part worked out. But I don't know how to look at the fidelity offerings and KNOW what the interest rate will be. Maybe because I was aiming for a new (auction) purchase there would not be a way to know the final return until the auction is over?? Is that how it works?

 

[QG67PK00]

I was trying to buy a new 8 week t-bill. So that part worked out. But I don't know how to look at the fidelity offerings and KNOW what the interest rate will be. Maybe because I was aiming for a new (auction) purchase there would not be a way to know the final return until the auction is over?? Is that how it works?

In an auction purchase you wont know exactly what return you will get. In secondary market however you will know that before hand.
To get the investment rate of return in percentage for a secondary market offering, use this formula:
Investment Rate=daily interest x 365÷(PurchasePrice)
where daily interest equals ($100 - PurchasePrice), PurchasePrice is the Ask price quoted by Fidelity.

 

[Purslane]

Thank you. Would it be your recommendation to buy these bills at auction (where the return is not obvious) or in the secondary market where you know what you'll get?

 

[copyright1997reloaded]

Thank you. Would it be your recommendation to buy these bills at auction (where the return is not obvious) or in the secondary market where you know what you'll get?

I usually prefer auction, as you get the "best" price available on that auction. (That is assuming your order is for $10 million or less.). If you buy in secondary, there is "vig" involved. (The bid/ask spread and/or price markup by Fidelity.)

ETA: Having said that, the price can change from the anticipated "when issued" price (before the auction) or after the auction (as the market perception changes as a result of the auction). One approach is to dollar cost average in (that is, buy some over multiple auctions) similar to dollar cost averaging in terms of equity purchases.

 

[QG67PK00]

Most T-bills are auctioned every week, therefore buying in secondary market does not make much sense. Even though the rate at auction is unknown, it will not be too far off from the last week's auction rate. Secondary market adds a small premium in the from of bid/ask spread. Fidelity does not charge a markup on treasury security purchases.

 

[Purslane]

Sounds like auction is the best way to go. I just didn't realize the interest rate I was seeing was not necessarily what I would be getting. This helps. Every day is learning day. Thank you QG67PK00 and copyright1977reloaded.

​

 

[audreyh1]

I look at this site to see upcoming treasury auctions and the most recent auction results. It calculates the interest people got from each auction.

Upcoming Auctions — TreasuryDirect

www.treasurydirect.gov

 

[Purslane]

Most T-bills are auctioned every week, therefore buying in secondary market does not make much sense. Even though the rate at auction is unknown, it will not be too far off from the last week's auction rate. Secondary market adds a small premium in the from of bid/ask spread. Fidelity does not charge a markup on treasury security purchases.

About to buy a little more. This time with more confidence.

 

[jim584672]

View attachment 53911
View attachment 53912
Jan 16- March 18 = 15 + 28+ 17 days = 60 days of interest payments.

$215,000.00 - $213,583.63 = $1,416.37 or $23.61/day of interest due.

Annualized this would equal $23.61 x 365 = $8,616.25 which would equal 4.00755% yearly interest on my $215k investment.

I thought I was supposed to get 4.293%. on the T bill.

Currently 7-day yield is 4.01% in MM account, which is essentially equivalent to the actual bond return. This means the only real advantage of the Tbill is not having to pay high California state tax on the returns, which is still a plus. But I don’t like playing with things I don’t understand, even if the risk is low. Can someone please tell me how I should be calculating this and/or if I am looking at these Tbills all wrong?

https://www.treasurydirect.gov/instit/annceresult/press/preanre/2025/R_20250116_1.pdf

According to the auction results it is showing a price of 99.341222 and yield of 4.322%.

How to calculate...

https://www.treasurydirect.gov/instit/annceresult/press/preanre/2004/ofcalc6decbill.pdf