Treasury Bills, Notes, and Bonds Discussion 2024+

[audreyh1]

I bought a TIPS on the secondary market about a month ago. Alas, I did not get one at 2 or more percent. I got a measly 1.996% plus inflation.

That Oct 2023 auction real yield was 2.44% and the coupon was 2.375%. It was supposed to be record breaking (and it was) so I made room in one of my IRAs for it.

 

[lem1955]

Do you get better outcomes if you buy gov't notes,bonds,TIPS right when the auction opens? How does a Re-open differ from a new issue auction?

 

[audreyh1]

Do you get better outcomes if you buy gov't notes,bonds,TIPS right when the auction opens? How does a Re-open differ from a new issue auction?

For T-bills it’s called a reissue and no different from a new issue. They are just using the same CUSIP for a new issue at 1/2 or 1/4 the duration.

For TIPS with a reopen the coupon and maturity date has already been established by the original issue. For 5-year TIPS it’s just a 2 months shorter maturity period. So it’s a bit more complex. TIPSWatch blog can help explain.

I’m not familiar with Treasury notes and bonds to know how reopens works.

 

[JoeWras]

In a reopen, the coupon rate of a note or bond is the same as the original issue. So you know the coupon. The price will fluctuate to give you the ultimate market rate. Hence, you can very well pay a premium for a reopen, i.e. you might pay $101.55 for a note, for example. Or, the price could be at a massive discount.

I want to point out that paying a premium on a Treasury Note or Bond creates a new tax task that someone may not have encountered before if all they have done in the past is buy at auction, which almost always has a small discount on the Note on original issues. It is usually pretty straight forward, but can get complicated if the numbers are large.

 

[Sunset]

In a reopen, the coupon rate of a note or bond is the same as the original issue. So you know the coupon. The price will fluctuate to give you the ultimate market rate. Hence, you can very well pay a premium for a reopen, i.e. you might pay $101.55 for a note, for example. Or, the price could be at a massive discount.

I want to point out that paying a premium on a Treasury Note or Bond creates a new tax task that someone may not have encountered before if all they have done in the past is buy at auction, which almost always has a small discount on the Note on original issues. It is usually pretty straight forward, but can get complicated if the numbers are large.

Does that task go away if a person buys it only in their IRA ?

 

[tulak]

No tax issues if done in an IRA. I buy all my TIPS in an IRA to avoid dealing with taxes. If you buy TIPS in a taxable account, make sure to do your homework since there are caveats you need to be aware of.

tipswatch.com is a great resource for detailed info about TIPS. You can find info on “What is the difference between new and reissued TIPS?” on their Q&A: Q&A on TIPS

I’m not interested in reopens since I’m trying to get a later maturity date. If I was looking at reopens, then I’d likely buy the TIPS on the secondary market instead of waiting for a reopen. You have more control over what you buy on the secondary market than at auction and I don’t see the benefit for reopens.

 

[copyright1997reloaded]

I picked up some of the 5-year TIPS reopening (CUSIP 91282CLV1) this morning. Even though the when-issued pricing (prior to the auction) was around 2.05% real, the demand was weak and the auction (and I) got the high bid of 2.121%. I'm very happy with the result.

 

[Chuckanut]

In other words, demand for this TIP was extremely weak. But for investors, the result was excellent: a real yield to maturity of 2.121% and a price below par value.

Not bad for today’s reopening of the 5 year TIPS.
2.121% plus inflation. I am a low inflation skeptic so for me this is a good deal. YMMV.

 

[copyright1997reloaded]

Not bad for today’s reopening of the 5 year TIPS.
2.121% plus inflation. I am a low inflation skeptic so for me this is a good deal. YMMV.

Yes, had I known it would go at 2.121% I would have bought 3X what I bought.

 

[Chuckanut]

Yes, had I known it would go at 2.121% I would have bought 3X what I bought.

My previous TIPS bought on the secondary market was “only” 1.966% for 5 years.

The TIPS real return rate seems to be a rather volatile creature. Is this normal?

 

[copyright1997reloaded]

My previous TIPS bought on the secondary market was “only” 1.966% for 5 years.

The TIPS real return rate seems to be a rather volatile creature. Is this normal?

It can be. Chart from Tipswatch (actual chart from FRED):
https://tipswatch.com/wp-content/uploads/2024/12/5-real-dec2.jpg

ETA: I remember real returns almost at 4% many years ago. I bought some, but if I were smarter, I would have bought tons of them.

 

[jazz4cash]

Does that task go away if a person buys it only in their IRA ?

What is the task?

 

[tulak]

Results of the 10-year TIPS auction: https://www.treasurydirect.gov/instit/annceresult/press/preanre/2025/R_20250123_3.pdf

Coupon rate of 2.125% and a purchase price of $98.95.

Looks good to me!

 

[audreyh1]

Highest in 16 years according to TIPSWatch New 10-year TIPS gets real yield of 2.243%, highest for this term in 16 years

 

[aja8888]

If coupons stay this high, I will buy into the 5 year in April when it comes up for auction. Ten years is too far out for me to invest in. I figure I have five "good" years left (LOL).

 

[tulak]

I’m waiting for the October 5-year auction to fill in the last ring of my ladder, at least for now. This ones fill a gap for 2031.

I’ll likely buy regardless, but it’d l be nice if rates stay high.

 

[Chuckanut]

Highest in 16 years according to TIPSWatch New 10-year TIPS gets real yield of 2.243%, highest for this term in 16 years

That’s enough of a premium to tempt me. The risk reward balance versus the ordinary 10 year tbill seems favorable. Time will tell. YMMV.

 

[Chuckanut]

Ten year TIPS which had a real yield of 2.2% a few weeks ago are now yielding under 2%.

 

[audreyh1]

Ten year TIPS which had a real yield of 2.2% a few weeks ago are now yielding under 2%.

Interesting. Any idea why?

 

[joesxm3]

I heard some commentators saying that if the government manages to cut some costs it will get a double whammy in that borrowing less will mean less bonds to sell and the interest rate needed to clear the auction will go down.

 

[Montecfo]

I heard some commentators saying that if the government manages to cut some costs it will get a double whammy in that borrowing less will mean less bonds to sell and the interest rate needed to clear the auction will go down.

Yes that makes sense. Let's see if it happens.

 

[Chuckanut]

Interesting. Any idea why?

Not a clue. I am definetly not a bond guru.