Treasury Bills, Notes, and Bonds Discussion 2024+

[grasshopper]

I have lots of TB coming due. With MM VMFXX currently at 5.27% and 6 month TB at around 5.25%. I am just letting tax advantaged roll to MM, and taxable roll into TB's to save on AZ state tax of 2.5%. YMMV

 

[Another Reader]

If you really don’t think you need the funds for a year then I would tend to go longer and buy the 12 to 15 month CDs offered at 5.25% to 5.5% directly by online banks such as Ally or Synchrony. I have some of those too.

The 52 week T-bill is already under 5%.

Brokered CDs with call protection have also dropped below 5%.

NASA FCU is offering a 9 month at 5.7 with a $10k minimum.

 

[Koolau]

My "problem" is that I have so little cash. Yes, I get a big influx of cash from RMDs (++) each year, but burn through that by year's end - not even 6-month bills make sense for me. Virtually everything else that's cash-like is already tied up (MYGAs for instance.) Money market accts are currently as good or almost as good, so don't want to get into those either. Doesn't look like I'm in the market for bill/notes/bonds right now, even though I salivate at the current rates. Good on you folks who can make this play. I'm living vicariously through you right now.

Heh, heh, I'm w*rking on DW right now to cash her MYGA for over $100K cash - of which much of it has already been taxed. That's end of this month. If that happens, we just might be back with a fist full of dollars for these instruments. YMMV

 

[calmloki]

We're in California and looking at the 9.3% state tax rate. I look at the difference between 4, 12, and 26 week rates, then the 1 year rate, compare those rates to the state taxable rates at Marcus or Synchrony or Nasa and just lock up. Do I grab a lower rate (after paying state tax) but longer term 9 to 15 month CD or snap up a slightly higher 4 or 12 week T-Bill? Or maybe the Senate 5 year CD, which would work out to about 4.5% APY after state tax.
wurra wurra

 

[tulak]

I've put in an order to buy 10-year TIPS at this thursday's auction. This fills in two more rungs in my TIPS ladder, for 2035 and 2036. I might buy one more rung later in the year for 2037, at which point I'll likely be done buying TIPS.

Vanguard estimates 1.66% and Fidelity estimates 1.755%.

From tipswatch:

Real yields have been volatile over the last week, but at this point the Treasury’s estimate for a full-term 10-year TIPS is a real yield of 1.69%, down 14 basis points in a week. The most recent 10-year TIPS trading on the secondary market closed Friday at 1.66%.

https://tipswatch.com/2024/01/14/thursdays-10-year-tips-auction-is-it-a-must-buy/

 

[Trooper]

My "problem" is that I have so little cash. Yes, I get a big influx of cash from RMDs (++) each year, but burn through that by year's end.[/QUOTE
You can buy T bills inside a tIRA also.

 

[aja8888]

My "problem" is that I have so little cash. Yes, I get a big influx of cash from RMDs (++) each year, but burn through that by year's end.[/QUOTE
You can buy T bills inside a tIRA also.

Exactly, that's the best place to hold T bills.

 

[RunningBum]

Exactly, that's the best place to hold T bills.

Why? For those of us in a state with income tax, wouldn't a better place be in taxable so we get the state tax break?

 

[Sunset]

We're in California and looking at the 9.3% state tax rate. I look at the difference between 4, 12, and 26 week rates, then the 1 year rate, compare those rates to the state taxable rates at Marcus or Synchrony or Nasa and just lock up. Do I grab a lower rate (after paying state tax) but longer term 9 to 15 month CD or snap up a slightly higher 4 or 12 week T-Bill? Or maybe the Senate 5 year CD, which would work out to about 4.5% APY after state tax.
wurra wurra

We have a similar issue in IL with 5% State tax.

If I lived in CA I would compare like this (which I hope is correct).

(1 year T-bll rate) * 1.093 = Rate of some CD has to be higher to buy.

Example: 1 year T-bill now is 4.8%
4.8 * 1.093 = 5.2464 -> so I see a CD paying more than 5.25% it's a better deal.

Let me know if I have an error as I'm using this myself to compare

 

[pb4uski]

^^^ I think you do have a slight error. Assuming the 9.3% is the CA tax then the formula should be 4.8/(1-9.3%) = 4.8/.907 = 5.292.

Proof: 5.292 * 9.3% = 0.492 in tax and 5.292 - 0.492 in tax = 4.8

 

[Trooper]

Why? For those of us in a state with income tax, wouldn't a better place be in taxable so we get the state tax break?

I was saying that T-Bills could be held in in an IRA, if one didn't have cash in a taxable account. I believe @aja8888 was referring to the benefit of tax deferring the ordinary income generated by T-Bills.

My opinion is if you must generate ordinary income in a taxable account, then T-Bills are better (than CDs or MMFs) due to the state tax benefit. However deferral is better still, although most states don't give you the benefit upon withdrawal from the tIRA.

 

[Surewhitey]

Treasury bonds are liquid. You aren't really "locking up" for 30 years. You can sell them at any time at the prevailing market price.

Yeah, I get that. Just don't typically buy anything that I may have to sell on the secondary. We did get a couple of 5 yr Marcus CD's for 4.1% this week, so our loose change is set for a while. We have a good bit of the first yr of the ladder coming due throughout the year, so we have to deal with that soon enough.

 

[aja8888]

I was saying that T-Bills could be held in in an IRA, if one didn't have cash in a taxable account. I believe @aja8888 was referring to the benefit of tax deferring the ordinary income generated by T-Bills.

My opinion is if you must generate ordinary income in a taxable account, then T-Bills are better (than CDs or MMFs) due to the state tax benefit. However deferral is better still, although most states don't give you the benefit upon withdrawal from the tIRA.

Yes, I meant holding in an IRA gives you tax deferral benefits.

 

[Sunset]

^^^ I think you do have a slight error. Assuming the 9.3% is the CA tax then the formula should be 4.8/(1-9.3%) = 4.8/.907 = 5.292.

Proof: 5.292 * 9.3% = 0.492 in tax and 5.292 - 0.492 in tax = 4.8

Thanks.....

I did think later I could check by comparing the interest earned - tax vs the interest earned without tax. But your way is a lot nicer.

 

[Out-to-Lunch]

Thanks.....

I did think later I could check by comparing the interest earned - tax vs the interest earned without tax. But your way is a lot nicer.

If it makes you feel any better, all you did was invoke the Binomial Approximation, viz., (1+x)^n ≈ 1 + nx. This works quite well for small values of x.

If you want to go a step farther, you can use
(1+x)^n ≈ 1 + nx + 0.5 n(n-1)x^2, which is a very approximation.

 

[Sunset]

If it makes you feel any better, all you did was invoke the Binomial Approximation, viz., (1+x)^n ≈ 1 + nx. This works quite well for small values of x.

If you want to go a step farther, you can use
(1+x)^n ≈ 1 + nx + 0.5 n(n-1)x^2, which is a very approximation.

You are generous

I was really thinking what seems close, since I didn't know any formula, and this is what I've been using for my State tax comparison

 

[RunningBum]

I was saying that T-Bills could be held in in an IRA, if one didn't have cash in a taxable account. I believe @aja8888 was referring to the benefit of tax deferring the ordinary income generated by T-Bills.

My opinion is if you must generate ordinary income in a taxable account, then T-Bills are better (than CDs or MMFs) due to the state tax benefit. However deferral is better still, although most states don't give you the benefit upon withdrawal from the tIRA.

I wasn't questioning your post. I was questioning aja's post stating the tIRA is the "best" place. It may be for some, but certainly not unequivocally. aja then deleted that post and the reference somehow fell to your post.

 

[jim584672]

Today's auction.

28 day Bills - 5.395%
56 day Bills - 5.407%

 

[audreyh1]

Todays auction:

10-year TIPS: coupon 1.75%, real yield 1.81%

This week’s T-bill Auction results:

Bills	CMB	CUSIP	Issue Date	High Rate	Investment Rate	Price per $100
4-Week	No	912797JE8	01/23/2024	5.285%	5.395%	$99.588944
8-Week	No	912797JJ7	01/23/2024	5.275%	5.407%	$99.179444
13-Week	No	912796CX5	01/18/2024	5.225%	5.383%	$98.679236
17-Week	No	912797JX6	01/23/2024	5.185%	5.363%	$98.286069
26-Week	No	912797JS7	01/18/2024	4.975%	5.188%	$97.484861

 

[tulak]

Todays auction:

10-year TIPS: coupon 2.75%, real yield 1.81

Do you mean 1.75% for the coupon for the 10-year TIPS?

Not that I would complain to get 2.75%.

 

[Sunset]

Todays auction:

10-year TIPS: coupon 2.75%, real yield 1.81

.....

When I look at treasury site I see two numbers :
High Yield Interest Rate
1.810% and 1.750%

I'm unclear as to which we get ?

 

[Dash man]

With treasury bills you don’t pay state income tax.

 

[audreyh1]

Do you mean 1.75% for the coupon for the 10-year TIPS?

Not that I would complain to get 2.75%.

Yeah, fat finger.

Corrected above.

 

[audreyh1]

When I look at treasury site I see two numbers :
High Yield Interest Rate
1.810% and 1.750%

I'm unclear as to which we get ?

Sorry typo.

The real yield is 1.810% - that’s what you get. 1.75% is the coupon paid each year (two payments per year). The remainder was a discount to par at auction.

 

[Sunset]

Sorry typo.

The real yield is 1.810% - that’s what you get. 1.75% is the coupon paid each year (two payments per year). The remainder was a discount to par at auction.

Thanks.... I noticed it was sold at a discount

Are they all sold at a discount, or just not much interest in this one, this time.