Secondary Treasury market

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ut2sua

Recycles dryer sheets
Joined
Dec 6, 2007
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With saving account and short term CDs (1->3 year) paying from ~0.5%(Ally) to roughly 1%ish, folks can purchase 2 year US Treasury in the secondary market for ~2% (and maybe ~1.4% for 1 year)
I believe purchases in the secondary market can be done using investment accounts in TDA, Etrade, Ally Invest etc.
Opening an investment account with Ally will involve a simple transfer between saving and investing account for me. Is there any catch buying US Treasury in the secondary market? I try to look at YTW/YTM and Maturity date. I think it should be very safe, but I have never done it. Posting here to ask for the common wisdom on this wonderful forum. Thanks in advance for all comments.
 
ut2sua said:
With saving account and short term CDs (1->3 year) paying from ~0.5%(Ally) to roughly 1%ish, folks can purchase 2 year US Treasury in the secondary market for ~2% (and maybe ~1.4% for 1 year)
I believe purchases in the secondary market can be done using investment accounts in TDA, Etrade, Ally Invest etc.
Opening an investment account with Ally will involve a simple transfer between saving and investing account for me. Is there any catch buying US Treasury in the secondary market? I try to look at YTW/YTM and Maturity date. I think it should be very safe, but I have never done it. Posting here to ask for the common wisdom on this wonderful forum. Thanks in advance for all comments.
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Check if they charge a commission. Schwab does it for free, I think Vanguard as well.
 
At Schwab the bond desk takes care of things for you. You can call for advice or just with questions. IIRC the person I have talked to has 17 years of experience in the business. Once you have made a decision you can enter your trade on-line or ask the bond desk person to do it for you. IIRC the charge for a meat-based trade is $25 but they have waived it more than once for me. I think buying on the auction was free. This was all two or three years ago when I was buying short term/t-bills. Maybe fees have changed. Ask.
 
Good point Jim and OldShooter. I did assume trade fee would be zero for Treasury, but it is a good idea to ask. I bought CDs in the secondary market with Etrade and TDA before, and it was zero fee with them (thus my assumption).
 
daylatedollarshort said:
I sometimes buy treasuries at Fidelity on secondary market. Trades done online have $0 fees - https://www.fidelity.com/trading/commissions-margin-rates.


I also like the rates on Treasuries these days and am going to be putting my cash into a 1 Treasury ladder, as I wait for rates to top out before buying longer duration bonds.
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I am thinking along the same line. Treasury yield > CD yield right now. 2 year term seems to be the sweet spot. This has been the escape door savers have been looking for (still an upward fight ~2% yield vs xx% inflation however).
 
ut2sua said:
I am thinking along the same line. Treasury yield > CD yield right now. 2 year term seems to be the sweet spot. This has been the escape door savers have been looking for (still an upward fight ~2% yield vs xx% inflation however).
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We've been looking at Fidelity's nifty yield chart for highest yield and average yield for Treasuries, zero coupon Treasuries, TIPS, bonds at different ratings, muni bonds, etc. Treasuries rates have been looking pretty good (relatively) at the shorter durations. Compared to inflation they are all awful but it is what it is. For 2 years out I have been buying TIPS on the secondary market when the prices aren't too terrible.
 
I’m seeing 2 year CDs at Fidelity for 2.0% vs Treasuries at 2.13%. Very little difference. I don’t usually invest in these assets but wanted to recommend for a friend who wants a super safe investment?. What are the other differences if any between them?
 
Retireby45ish said:
I’m seeing 2 year CDs at Fidelity for 2.0% vs Treasuries at 2.13%. Very little difference. I don’t usually invest in these assets but wanted to recommend for a friend who wants a super safe investment?. What are the other differences if any between them?
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The Treasuries will be state tax free. If you live in a high tax state, that is something to consider.
 
Retireby45ish said:
I’m seeing 2 year CDs at Fidelity for 2.0% vs Treasuries at 2.13%. Very little difference.
Click to expand...


Very little difference if you don't buy many. It takes the same effort to buy either one. Why not buy the one that pays more?
 
Retireby45ish said:
I’m seeing 2 year CDs at Fidelity for 2.0% vs Treasuries at 2.13%. Very little difference. I don’t usually invest in these assets but wanted to recommend for a friend who wants a super safe investment?. What are the other differences if any between them?
Click to expand...

If Treasury is 99.99% safe, CD would be 99.98% safe to me, but CDs have FDIC limit per bank, Treasury is unlimited, I guess (problems for those with too much $). The no state tax feature of Treasury is nice.
I have also just noticed broker CDs have better rate than Ally's CDs (not the case a few months ago).
 
How do you deal with a Treasury bought on the secondary market tax-wise when the purchase price may be at a premium or at a discount?

I made a purchase today of a Treasury due to mature 12/31/22; the purchase was at a premium. It was in my IRA so I won't have to worry about reporting the interest. I would also like to purchase some for a taxable account and am wondering how difficult it is to report the interest when the purchase is at a premium or a discount.
 
Turbo29 said:
How do you deal with a Treasury bought on the secondary market tax-wise when the purchase price may be at a premium or at a discount?

I made a purchase today of a Treasury due to mature 12/31/22; the purchase was at a premium. It was in my IRA so I won't have to worry about reporting the interest. I would also like to purchase some for a taxable account and am wondering how difficult it is to report the interest when the purchase is at a premium or a discount.
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Bonds or notes bought over 100 means the premium is amortized over the life of the security. Tax software will figure it out.
 
Retireby45ish said:
Are you better off buying Treasuries on secondary market or primary?
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This was essentially my question too. Based on my limited findings, secondary market appeared to give higher yield, and one can buy on the spot using a broker account. I was looking for any catch that I may not be aware of. That was why I started this thread.
 
Retireby45ish said:
Are you better off buying Treasuries on secondary market or primary?
Click to expand...
This is the kind of question that the bond desk at Schwab can deal with easily. I'm sure Fido has a similar resource. Maybe VG too. Places like Ally, the big banks, and the insurance companies may well be less capable.
 
Retireby45ish said:
Are you better off buying Treasuries on secondary market or primary?
Click to expand...
Secondary market, it is very liquid, clears the next day. Auctions have a lag time between placing the order, the auction, and the settlement.
 
Expected yield today on Fidelity for the three month zero coupon Treasuries is at .485% and 6 month at .914%. Yields are going up fast right now. I've got my orders in.
 
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