Treasury Bills, Notes, and Bonds Discussion 2024+

[tulak]

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.

Coupon rate is always in 0.125% increments. If the real yield isn’t evenly divisible by 0.125%, then they make up the difference by selling at discount.

In this case, the yield is 1.810% - 1.75% = 0.06%, which (should) equal the discount.

 

[audreyh1]

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.

For the initial auction they determine the coupon from the bids and the remainder is a discount. But they auction additional bonds later, same maturity date, and these additional issues may auction at a premium or a discount which sets the real yield because the coupon is already fixed.

 

[audreyh1]

Interesting, I just realized this TIPS had a negative inflation adjustment making it even cheaper. If you’ve followed the CPI over the last few months you’ll know it has been dropping slightly (unadjusted). Well that showed up at the auction today.

https://tipswatch.com/2024/01/18/10-year-tips-auction-gets-real-yield-of-1-810-an-attractive-result/

 

[GravitySucks]

Bought todays 10 year TIPS and like the Over/Under of 2.34% inflation.

My ladder is complete but will need a few tweaks. Kind of enjoying the bond games.

 

[Closet_Gamer]

We're in California and looking at the 9.3% state tax rate.

You made me cringe when I read 9.3% state tax rate.

We're at 3.07%. I'd like it to be 0% but its low enough that it doesn't really drive too much of my thinking.

9.3% is a serious burden.

Ouch.

 

[Shelbydoo]

Hey guys

I’m an Amatuer at best but have been learning a lot from this thread. I’ve been purchasing t-bills through Charles Schwab for well over a year now but the rate of return doesn’t jive with what’s posted (updated weekly) here.

Is this because I’m getting them second hand?
Does Schwab take that much of a cut? I’ve scoured their website and cannot figure out how much they take.
Would it be more advantageous for a person to skip Schwab and buy them directly from the gov?

Thanks

 

[Dash man]

I typically buy mine at auction at no charge.
When you buy them on the secondary market, Schwab has their small fee baked into the price.
In the secondary market, the Yield to Maturity is based on both the coupon rate and the price you pay. If you buy your treasury (or any bond) at a discount to the face value, some of your return is based on the portion you are paid at maturity, where you receive the difference between the purchase price and face value. If you pay above the face value of the treasury, your return is lower than the coupon rate.

 

[FIREd_2015]

Hey guys

...Would it be more advantageous for a person to skip Schwab and buy them directly from the gov?
Thanks

Most of what is posted on this thread is the yield on auction of new issues. You can buy new issues on Schwab's website by going to Research>Bonds CDs and Fixed Income. Scroll down to the bottom of the page where it says New Issues. Click on "Treasury Auctions" to see what is currently available.

The availability is based on the auction schedule that can be found at

https://home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf

The yield of recent auctions can be found at

https://www.treasurydirect.gov/auctions/announcements-data-results/

 

[jldavid47]

Hey guys

I’m an Amatuer at best but have been learning a lot from this thread. I’ve been purchasing t-bills through Charles Schwab for well over a year now but the rate of return doesn’t jive with what’s posted (updated weekly) here.

Is this because I’m getting them second hand?
Does Schwab take that much of a cut? I’ve scoured their website and cannot figure out how much they take.
Would it be more advantageous for a person to skip Schwab and buy them directly from the gov?

Thanks

If you buy them at auction there is no difference between buying them from your Schwab account or on Treasury Direct. You get the same price. If you purchase them on the secondary market there is a bid/ask spread. You buy at the ask (the higher price) and can sell at the bid (the lower price). Schwab (and every other broker on the planet) makes their money off the bid/ask spread. There is no commission if you do it online. Some brokers allow you to put in an order for bonds/bills online at your desired purchase price. Schwab does not.

One thing you need to remember is that the fixed income market is not like the equity market from an order entry and execution standpoint. The only thing they have in common is a bid/ask spread. And once the auction is held, the market price of the T-bill moves with the market. If you want to get the prices and rate you see here, buy at auction.

 

[audreyh1]

This week’s T-Bill auction results:

Bills	CMB	CUSIP	Issue Date	High Rate	Investment Rate	Price per $100
4-Week	No	912797JF5	01/30/2024	5.280%	5.390%	$99.589333
8-Week	No	912797JK4	01/30/2024	5.275%	5.407%	$99.179444
13-Week	No	912797HG5	01/25/2024	5.225%	5.383%	$98.679236
17-Week	No	912797JY4	01/30/2024	5.185%	5.363%	$98.286069
26-Week	No	912797JT5	01/25/2024	5.020%	5.237%	$97.462111
52-Week	No	912797JR9	01/25/2024	4.570%	4.814%	$95.379222

 

[Marc]

Looks like 26-week (today's rate 5.154) is dipping below MM. Given MM shouldn't really drop until short terms rates are lowered, does it make sense to buy 26-week anymore if one doesn't anticipate Fed lowering being at least six months out? On the other side the inventory of all durations of treasury bills, notes, and bonds will just be increasing providing a floor for treasuries; is 26-week stilll the sweet spot or will one or two year become the sweet spot "soon?"

 

[calmloki]

I slid in on some 5.5% 15 month CDs, but also have a filled order for a 4-month T-bill from yesterday. California and a 9+% state tax rate makes T-bills worthwhile for us for a longer time than lower state tax folks.

 

[audreyh1]

Looks like 26-week (today's rate 5.154) is dipping below MM. Given MM shouldn't really drop until short terms rates are lowered, does it make sense to buy 26-week anymore if one doesn't anticipate Fed lowering being at least six months out? On the other side the inventory of all durations of treasury bills, notes, and bonds will just be increasing providing a floor for treasuries; is 26-week stilll the sweet spot or will one or two year become the sweet spot "soon?"

That’s the debate. I’ve spread my bets- have 26 week, 13-week and MM fund.

The 26-week T-Bill auctioned at 5.199% on Monday. I was happy to lock in 6 months at that rate. That’s into the 2nd half of this year.

1 and 2 year have been well below the 26 week for a while.

13 week has been a bit higher than the 26 week for a while.

 

[jldavid47]

Looks like 26-week (today's rate 5.154) is dipping below MM. Given MM shouldn't really drop until short terms rates are lowered, does it make sense to buy 26-week anymore if one doesn't anticipate Fed lowering being at least six months out? On the other side the inventory of all durations of treasury bills, notes, and bonds will just be increasing providing a floor for treasuries; is 26-week stilll the sweet spot or will one or two year become the sweet spot "soon?"

It makes sense if you are paying state income tax on the MM fund interest.

 

[audreyh1]

This week’s T-Bill Auction results:

Bills	CMB	CUSIP	Issue Date	High Rate	Investment Rate	Price per $100
4-Week	No	912797JG3	02/06/2024	5.280%	5.390%	$99.589333
8-Week	No	912797JL2	02/06/2024	5.265%	5.397%	$99.181000
13-Week	No	912797HH3	02/01/2024	5.210%	5.368%	$98.683028
17-Week	No	912797JZ1	02/06/2024	5.150%	5.327%	$98.297639
26-Week	No	912797JU2	02/01/2024	4.985%	5.199%	$97.479806

 

[audreyh1]

This week’s T-Bill auction results:

Bills	CMB	CUSIP	Issue Date	High Rate	Investment Rate	Price per $100
4-Week	No	912797JH1	02/13/2024	5.280%	5.390%	$99.589333
8-Week	No	912797JM0	02/13/2024	5.270%	5.402%	$99.180222
13-Week	No	912797HQ3	02/08/2024	5.235%	5.394%	$98.676708
17-Week	No	912797KE6	02/13/2024	5.180%	5.358%	$98.287722
26-Week	No	912797GK7	02/08/2024	5.045%	5.263%	$97.449472

Rates back up where they were 2 weeks ago. There was a little dip last week.


Also I forgot to include the Notes (monthly) for January last week. A couple already had their early February auction:

Notes	Reopening	CUSIP	Issue Date	High Yield	Interest Rate	Price per $100
2-Year	No	91282CJV4	01/31/2024	4.365%	4.250%	$99.782022
3-Year	No	91282CKA8	02/15/2024	4.169%	4.125%	$99.877119
5-Year	No	91282CJW2	01/31/2024	4.055%	4.000%	$99.753334
7-Year	No	91282CJX0	01/31/2024	4.109%	4.000%	$99.342733
10-Year	No	91282CJZ5	02/15/2024	4.093%	4.000%	$99.243059

 

[PointBreeze]

Treasury STRIPS?

Looking to put some of our tax-deferred portfolio into 10-year treasuries (learned my lesson about bond funds!). I am a novice re: buying individual bonds. I was looking through the secondary market on Fidelity and found Treasury STRIPS.

Here is what I've found out about these:

Essentially, STRIPS are Treasury notes or bonds that have had their principal and interest components stripped apart and sold separately as zero-coupon bonds.​

Does anyone have experience with these? I would appreciate any advice/information.

Thanks!

 

[sengsational]

My grandmother bought one for each of my kids when they were born, maturing when they were 18. These were after tax, and so I got the 1099 IOD every year on the imputed gain. Kind of a PITA. In tax-deferred, that wouldn't be an issue. I would expect the IRR would be the same as other treasuries that still have their periodic payments.

 

[calmloki]

So this week we can do a 13 week, and 26 week, or a 42 day (why not 6 week?) on Tuesday. Kinda tempted by that one - is it normally more like the returns on a 4 week return T-bill? Any odd gotchas about it?

 

[Another Reader]

So this week we can do a 13 week, and 26 week, or a 42 day (why not 6 week?) on Tuesday. Kinda tempted by that one - is it normally more like the returns on a 4 week return T-bill? Any odd gotchas about it?

I routinely buy 13 and 26 week bills, as they have been the sweet spot recently. Whatever cash is sitting in the brokerage accounts gets deployed, unless it is earmarked for the periodic index fund purchases.

 

[audreyh1]

So this week we can do a 13 week, and 26 week, or a 42 day (why not 6 week?) on Tuesday. Kinda tempted by that one - is it normally more like the returns on a 4 week return T-bill? Any odd gotchas about it?

Not really any gotchas although not all brokerages offer to buy it for you it at auction.

42 day instead of 6 week is because it’s not a regularly offered T-bill.

 

[copyright1997reloaded]

Just a FYI. With today's inflation report, the 5 and 10 year TIPS yields shot up a bit this morning.

10y TIPS real rate is 1.988% as I type this, up from 1.856% 5 days ago. I'm trying to buy some (secondary).

ETA: Trade executed (just a 10K nibble) @ $97.945 (1.979% yield, the best I could do w/a smallish order).

 

[imbatman]

FYI, for those new to high interest rates in Government Money Market funds....if you are in a high taxed state that allows deductions for government debt, you should take a gander at Fido's (for Fidelity Funds only) % of government holdings in their MM and Sweep funds, which they just released yesterday.....definitely going to be worth calculating for me:

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/TY23-GSE-Supplemental-Letter.pdf

 

[calmloki]

FYI, for those new to high interest rates in Government Money Market funds....if you are in a high taxed state that allows deductions for government debt, you should take a gander at Fido's (for Fidelity Funds only) % of government holdings in their MM and Sweep funds, which they just released yesterday.....definitely going to be worth calculating for me:

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/TY23-GSE-Supplemental-Letter.pdf

So I've been looking because we have some cash sitting in FZDXX, which claims a composition including 19.67% government debt and about 41% in government agency and US Treasury repurchase agreements.

Wouldn't mind writing off some portion of what we've earned in FZDXX given our Ca tax status. Only thing I found was something claiming that FZDXX held under 5% in state tax free, thus was ineligible for a write off. But I'm very unclear on this. Will say Fidelity hasn't sent us anything saying we can write down our taxes, so that's a bad sign.

Can any of you speak to whether any portion of FZDXX earnings is free of state tax before we ship off our tax data? I'd love to point out possible tax savings to our preparer.

 

[audreyh1]

This week’s T-Bill auction results:

Bills	CMB	CUSIP	Issue Date	High Rate	Investment Rate	Price per $100
4-Week	No	912797JJ7	02/20/2024	5.280%	5.390%	$99.589333
8-Week	No	912797JN8	02/20/2024	5.270%	5.402%	$99.180222
13-Week	No	912797FH5	02/15/2024	5.230%	5.388%	$98.677972
17-Week	No	912797KF3	02/20/2024	5.215%	5.395%	$98.276153
26-Week	No	912797KB2	02/15/2024	5.065%	5.285%	$97.439361