Treasury Bills, Notes, and Bonds Discussion 2024+
- Thread starter audreyh1
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audreyh1
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This week’s T-bill auction results:
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Midpack
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Now that the landscape has changed, where's the conservative, long (we don't need any of it) fixed income smart money being deployed? I've never been interested in riskier fixed income, I'd rather have somewhat predictable fixed income assets, and use equity funds for more risk/return. I've been all 26-52 week treasuries for over 2 years, but I am considering same T-Bills, longer treasuries, and/or VBTLX as our T-Bills mature now. And I'm not averse to having some cash in VMFXX short term. Treasury yields are coming down, presumably more as the Fed cuts rates - though supply v demand may change the correlation some. And with rates highly unlikely to rise anytime soon, I assume VBTLX isn't a bad way to go in the next few years. I assume MMFs and online savings interest rates will come down almost in lock step with Fed rate cuts.
From the 'doesn't hurt to ask camp' as many here are better versed in fixed income than I am.
From the 'doesn't hurt to ask camp' as many here are better versed in fixed income than I am.
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OP
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audreyh1
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I use cash (including laddered short-term CDs and T-bills), short-term bond index and intermediate bond index funds. Overall duration is kept fairly short within that duration spread.
pb4uski
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From your post it is hard to decipher where your fixed income boundaries are.... I've never been interested in riskier fixed income, I'd rather have somewhat predictable fixed income assets, and use equity funds for more risk/return. ...
From the 'doesn't hurt to ask camp' as many here are better versed in fixed income than I am.
After risk-free, "full faith and credit" Treasuries and FDIC-insured brokered CDs the next step would be government sponsered entities (aka GSEs or Agencies). These are not explicitly guaranteed by the US government but are thought to be implicity guaranteed because they are important enough that the US government wold never let them fail. That said, they are generally very prudently managed and financially strong on their own merits so the need for any government assistance is unlikely but a nice backstop to have. This group would include bonds issued by the Federal Home Loan Bank, the Federal Farm Credit Bureau, Federal Home Mortgage Corp, etc. These bonds usually offer better yields than Treasuries, but are often callable.
Another category is corporate bonds. I tend to limit myself to investment grade corporate bonds (BBB-/Baa3 or higher by S&P/Moody's) and actually shy away from even BBB-/Baa3 issues but will consider them. One thing to understand is while you may see many corporate bonds that are callable, quite often the first call is just a few months prior to maturity to give them flexibility in refinancing so the call risk is quite low.
The last fixed income category, and one of my favorites, are preferred stocks. Again, I tend to limit myself to investment grade issuers. My favorite is ALL/PRB aka ALL-B, a fixed-to-floating rate preferred issued by Allstate that yields 8.54%. Another favorite is C/PRN aka C-N, a fixed-to-floating issue from Citigroup that sports a 9.90% yield. Both of these are niche, special situations. In the case of the Citigroup issue, while one would normally think it would be called there are tax reasons that keep them from calling it and make it very unlikely that it will be called. I've cobbled together a portfolio of 54 preferred that have a yield of 6.84% and to some extent I use this as an equity substitute, figuring that if I can get 6.84% with slight risk and much lower volitality than equities then that is a good risk-adjusted yield.
Surewhitey
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Thoughts on 10yr vs interest rates continue to climb? I just think it's not likely to go much more up... Looking to lock in some MM monies for longer terms.
OP
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audreyh1
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This week’s T-bill auction results:
October Treasury Note auction results:
During October rates increased from their September lows, especially at the longer end. By the traditional measure of 10yr versus 2yr yield, the treasury yield curve is no longer inverted.
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October Treasury Note auction results:
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During October rates increased from their September lows, especially at the longer end. By the traditional measure of 10yr versus 2yr yield, the treasury yield curve is no longer inverted.
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Marc
Recycles dryer sheets
Why can't the longer term keep going up? After all, the yield curve will continue to un-invert if we have no recession. Add to that large supply and there is no reason we can't see the longer end continue to rise even as the Fed lowers short term rates.
Surewhitey
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I'm thinking of housing rates @30yr should be less to accommodate the housing economy is a bigger risk. I'm thinking the 10yr would be less risk of going much higher for this reason. And if there's a recession, they'll cut rates more than usual on short rates, likely downward pressure on long rates too.
I don't know, but I'm ok with some long term safe stuff hoping inflation doesn't come roaring back...
Midpack
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I’m no expert, but as I understand it. The yield curve can “un-invert” in two ways. The long end can go up from here. The short end can go down from here. The Fed is cutting rates, and that’s what drives the short end, so the latter will play a bigger role in reverting to a typical yield curve? The long end yields are driven by bond investors, not the Fed.
Here’s what Treasury yields have done YTD. So far the short end is down much more than the long end is up - and Fed rate cuts have just begun.
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audreyh1
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Yes, the short end comes down with Fed rates. What the long end does depends on the economic and inflation outlook as perceived by the bond market.
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audreyh1
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Federal Reserve meeting and announcement today. We’ll see what they have to say now in terms of inflation and economy and what rate change they make. I believe 0.25% drop in rate is expected.
ETA: yes, lowered 0.25%. Press conference at 1:30pm ET
ETA: yes, lowered 0.25%. Press conference at 1:30pm ET
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OP
OP
audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
This week’s T-bill auction results:
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OP
OP
audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
This week’s T-bill auction results:
I’m falling behind tracking this. I took all my T-bills off Autoroll because I’m anticipating using some extra cash next year and want the liquidity. So I’m not paying as much attention.
Plus I am getting a little tired of tracking individual issues. It was quite fun there for a while.
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I’m falling behind tracking this. I took all my T-bills off Autoroll because I’m anticipating using some extra cash next year and want the liquidity. So I’m not paying as much attention.
Plus I am getting a little tired of tracking individual issues. It was quite fun there for a while.
Surewhitey
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Put a chunk into the 7yr auction in a couple of days... ~4.25%. MM is down to ~4.3%, so thought we'd lock it up for a bit.
Marc
Recycles dryer sheets
The two year (4.326%) and ten year (4.320%) have reinverted this morning; could a recession prediction be back?
OP
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audreyh1
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Interesting, I see that the 26 week T-bill has made it back above 4.5% on the secondary market.
grasshopper
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Just as I started 6 month CD's @ 4.50%
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audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
After going back up for a couple of months, T-bill rates have dropped this week on the secondary market. For example, the 26-week T-bill has dropped to a new year low today.
This week’s T-bill auction results:
Last month’s Treasury Note auctions:
The 10yr versus 2yr had uninverted a while ago, and though close are still uninverted today
This week’s T-bill auction results:
|
Last month’s Treasury Note auctions:
|
The 10yr versus 2yr had uninverted a while ago, and though close are still uninverted today
10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
The 10-year minus 2-year Treasury (constant maturity) yields: Positive values may imply future growth, negative values may imply economic downturns.
fred.stlouisfed.org
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Surewhitey
Thinks s/he gets paid by the post
I got a nice chuck of the 7&10yr...After going back up for a couple of months, T-bill rates have dropped this week on the secondary market. For example, the 26-week T-bill has dropped to a new year low today.
This week’s T-bill auction results:
Bills CMB CUSIP Issue Date High Rate Investment Rate Price per $100 4-Week No 912797MW4 12/10/2024 4.400% 4.476% $99.657778 8-Week No 912797NF0 12/10/2024 4.350% 4.440% $99.323333 13-Week No 912797MM6 12/05/2024 4.400% 4.511% $98.887778 17-Week No 912797NY9 12/10/2024 4.315% 4.438% $98.573653 26-Week No 912797NP8 12/05/2024 4.305% 4.462% $97.823583 52-Week No 912797NL7 11/29/2024 4.190% 4.388% $95.763444
Last month’s Treasury Note auctions:
Notes Reopening CUSIP Issue Date High Yield Interest Rate Price per $100 2-Year No 91282CLY5 12/02/2024 4.274% 4.250% $99.954094 3-Year No 91282CLX7 11/15/2024 4.152% 4.125% $99.924574 5-Year No 91282CMA6 12/02/2024 4.197% 4.125% $99.678141 7-Year No 91282CLZ2 12/02/2024 4.183% 4.125% $99.650943 10-Year No 91282CLW9 11/15/2024 4.347% 4.250% $99.220075
The 10yr versus 2yr had uninverted a while ago, and though close are still uninverted today
View attachment 53241
10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
The 10-year minus 2-year Treasury (constant maturity) yields: Positive values may imply future growth, negative values may imply economic downturns.fred.stlouisfed.org
Chuckanut
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The 5 year TIPS rate has dropped 24 basis points in the last week or so. If you picked up a TIPS in November at the 2%+ rate, give yourself a big pat on the back.
OP
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audreyh1
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I’m still celebrating my 5 yr TIPS purchase from Oct 2023. But that was pretty much a one-off for me.
Chuckanut
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I bought a TIPS on the secondary market about a month ago. Alas, I did not get one a 2 or more percent. I got a measly 1.996% plus inflation.
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