Treasury Bills, Notes, and Bonds Discussion

[audreyh1]

I have no idea and I don't think it matters in practice.

I’ll keep checking, but I don’t think these 119 day cash management bills have been offered as new issue (at auction) through my broker.

 

[MBSC]

I’ll keep checking, but I don’t think these 119 day cash management bills have been offered as new issue (at auction) through my broker.

They are available at auction through Fidelity but it's a small window. The auctions are at 11am ET Wed with the announcement 24 hours prior at 11am Tuesday. They usually show up on the Fidelity new issue page around 2PM ET Tuesday.

In August, Treasury said starting next Wed (10/19) they will be auctioned as "Treasury bills" instead of "Cash Mgt Bills" but the 24 hour announcement would still be in place for the 10/19 auction. It didn't say if the announcement window will be longer in the future.

CMBs are not available through TreasuryDirect and, according to Boglehead members, not available to Vanguard retail clients.

 

[Sunset]

I'm trying to understand about TIPs , a 5 year is supposed to re-open today, but does not show on Vanguard. When I look at the re-sale TIPs, I see the price is below 100, and I know that is how the interest is shown.

Looking at the last row in image.

What I don't understand is, since a TIP is inflation protected, and they don't know the inflation rate until near the end. How can they say the YTW is 2.067
Won't the effective yield vary a lot depending upon inflation ?
When it matures, do I only end up with 2.067%
OR
When it matures, I get the 0.5% coupon rate plus $100 for every $97.692 I paid for it plus inflation for the next 1.5 years ?

 

[JoeWras]

They are available at auction through Fidelity but it's a small window. The auctions are at 11am ET Wed with the announcement 24 hours prior at 11am Tuesday. They usually show up on the Fidelity new issue page around 2PM ET Tuesday.

In August, Treasury said starting next Wed (10/19) they will be auctioned as "Treasury bills" instead of "Cash Mgt Bills" but the 24 hour announcement would still be in place for the 10/19 auction. It didn't say if the announcement window will be longer in the future.

CMBs are not available through TreasuryDirect and, according to Boglehead members, not available to Vanguard retail clients.

For the heck of it, I bought one of these CMBs on Fidelity a few weeks ago, in order to fill in a hole in my ladder. You are exactly correct MBSC. The window is very small.

It is lists like a regular bill. It doesn't say "CMB."

The idea of these CMBs is that they are a buffer for the government to fill holes in their cash needs, based on the most recent requirements. Hence the small window of time. I'm guessing as things became more computerized with analytical prediction, this concept is melting away a bit, although Investopedia says that they were key to funding the government during the pandemic and the CAREs payments were going out.

One could imagine that back in the day, the government accountants, come in Monday morning, all sitting at their desks in the big warehouse building and were frantically working their pencils and paper spreadsheets. On Tuesday evening, they have the number. "We're $10B short, issue a CMB now!"

 

[gromit]

The link below is one site's forecast of Treasury rates for the next 5 years for various maturity lengths. Cursor over the charts to see predicted values for each month.
I find the charts to be interesting, but I strongly caution everyone that predictions are only best guesses, from 1 source, that can be terribly incorrect. In fact, their predicted peak for the 5 year treasury has changed from 4 to 5 to 6 percent within the last month and a half.
In the charts, I find it interesting that after the peak both the 5 year and the 3 month are predicted to stay above 5% for the entire 5 year period. Also, during the multi-year dip the 3 month rates appear to pretty much pay as well as the 5 year.
Again, the charts get me thinking, but I'm not going to rely on them as being accurate.
https://econforecasting.com/forecast-t03m

 

[ShokWaveRider]

The link below is one site's forecast of Treasury rates for the next 5 years for various maturity lengths. Cursor over the charts to see predicted values for each month.
I find the charts to be interesting, but I strongly caution everyone that predictions are only best guesses, from 1 source, that can be terribly incorrect. In fact, their predicted peak for the 5 year treasury has changed from 4 to 5 to 6 percent within the last month and a half.
In the charts, I find it interesting that after the peak both the 5 year and the 3 month are predicted to stay above 5% for the entire 5 year period. Also, during the multi-year dip the 3 month rates appear to pretty much pay as well as the 5 year.
Again, the charts get me thinking, but I'm not going to rely on them as being accurate.
https://econforecasting.com/forecast-t03m

Thanks for this. I wonder how accurate this will turn out to be. 6.5% for January 2023 for 2 and 5 year Treasuries. May be worth waiting for to pull the trigger on one's retirement cash.

 

[joesxm3]

I am going to buy my first T-Bill this week. I would like to move most of my static cash position into short term T-Bills (13 and 26 week).

I tried to look for the FOMC schedule for November and I see a meeting on 11/1 and 11/2 but the minutes listed as 11/23. If they are going to raise the federal funds rate by 0.75% next month, when would that be?

I think I will make a ladder, so maybe I should start small and hold off until the rate increase next month before increasing the weekly size?

Also, how should I divide between 13 and 26 weeks? Half to each duration, or more to 26 week?

Is weekly purchase too complicated for the ladder? Maybe monthly?

 

[MarieIG]

The link below is one site's forecast of Treasury rates for the next 5 years for various maturity lengths. Cursor over the charts to see predicted values for each month.
I find the charts to be interesting, but I strongly caution everyone that predictions are only best guesses, from 1 source, that can be terribly incorrect. In fact, their predicted peak for the 5 year treasury has changed from 4 to 5 to 6 percent within the last month and a half.
In the charts, I find it interesting that after the peak both the 5 year and the 3 month are predicted to stay above 5% for the entire 5 year period. Also, during the multi-year dip the 3 month rates appear to pretty much pay as well as the 5 year.
Again, the charts get me thinking, but I'm not going to rely on them as being accurate.
https://econforecasting.com/forecast-t03m

That is very interesting. I'm thinking, I may want to have some cash free for the spring (Feb - May).

 

[audreyh1]

I am going to buy my first T-Bill this week. I would like to move most of my static cash position into short term T-Bills (13 and 26 week).

I tried to look for the FOMC schedule for November and I see a meeting on 11/1 and 11/2 but the minutes listed as 11/23. If they are going to raise the federal funds rate by 0.75% next month, when would that be?

I think I will make a ladder, so maybe I should start small and hold off until the rate increase next month before increasing the weekly size?

Also, how should I divide between 13 and 26 weeks? Half to each duration, or more to 26 week?

Is weekly purchase too complicated for the ladder? Maybe monthly?

11/2 is when a rate hike would be announced effective immediately.

The rest is very much individual preference.

 

[JoeWras]

Last spring I started with buying 13 weeks every week. I then started adding 26s. As the 13s are rolling off, I'm moving to 26 week and adding a few 52s and even a 2 year note here and there. Basically I filled up a 13 week ladder and now I'm extending duration.

Nothing is set in stone. We've seen the Fed drop real fast when they need to, when a shock occurs. I want some longer term for that possibility. I'm not going to obsess over Fed meeting dates and try to predict what they will do.

YMMV. We can't predict the future. Everyone has their own ideas on a ladder. Do what you feel comfortable with.

 

[ShokWaveRider]

I am still not sure how to buy New issues with Schwab. Whenever I go and look there ar very few if no new issues available.

What is the best day to look for 13, 26 and 52 week bonds. And 2 year issues?

When they mature is the money just deposited into one's Schwab Cash account?

TIA

 

[Dash man]

I am still not sure how to buy New issues with Schwab. Whenever I go and look there ar very few if no new issues available.

What is the best day to look for 13, 26 and 52 week bonds. And 2 year issues?

When they mature is the money just deposited into one's Schwab Cash account?

TIA

Go to Treasury Direct and sign up for email notifications of upcoming auctions. They’ll be posted on Schwab shortly after the announcement each week.

https://www.treasurydirect.gov/mailing-lists/

 

[MarieIG]

I am still not sure how to buy New issues with Schwab. Whenever I go and look there ar very few if no new issues available.

What is the best day to look for 13, 26 and 52 week bonds. And 2 year issues?

When they mature is the money just deposited into one's Schwab Cash account?

TIA

I have only bought the 13 and 26 week bonds. The principal and interest show up in the settlement/ sweep account after they mature.

I will be interested in learning about payment of interest on long term bonds.

 

[JoeWras]

I am still not sure how to buy New issues with Schwab. Whenever I go and look there ar very few if no new issues available.

What is the best day to look for 13, 26 and 52 week bonds. And 2 year issues?

When they mature is the money just deposited into one's Schwab Cash account?

TIA

Besides email notifications, you can do some planning with the long form auction schedule:
https://home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf

The short form also works and just shows the next week or so:
https://www.treasurydirect.gov/auctions/upcoming/

 

[copyright1997reloaded]

I am still not sure how to buy New issues with Schwab. Whenever I go and look there ar very few if no new issues available.

What is the best day to look for 13, 26 and 52 week bonds. And 2 year issues?

When they mature is the money just deposited into one's Schwab Cash account?

TIA

They won't show up until formally annouced by Treasury. Use the schedule posted by JoeWras below for those dates.

After maturing, the money be money in your cash account. In my case, it shows up at 9:30AM on the morning after maturing. (I think, I will be able to confirm it this week as I have a T-Bill maturing.)

Besides email notifications, you can do some planning with the long form auction schedule:
https://home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf

The short form also works and just shows the next week or so:
https://www.treasurydirect.gov/auctions/upcoming/

 

[audreyh1]

I am still not sure how to buy New issues with Schwab. Whenever I go and look there ar very few if no new issues available.

What is the best day to look for 13, 26 and 52 week bonds. And 2 year issues?

When they mature is the money just deposited into one's Schwab Cash account?

TIA

13 week and 26 week are announced on Thursday and auctioned on Monday, or Tuesday if Monday is a holiday. You can order them anywhere from Thursday sometime after the announcement when they should show up on Schwab until first thing Monday morning.

52 week is every 4 weeks?

2 year note will be announced on 10/20.

Follow Joe’s link to upcoming auctions.

 

[audreyh1]

They are available at auction through Fidelity but it's a small window. The auctions are at 11am ET Wed with the announcement 24 hours prior at 11am Tuesday. They usually show up on the Fidelity new issue page around 2PM ET Tuesday.

In August, Treasury said starting next Wed (10/19) they will be auctioned as "Treasury bills" instead of "Cash Mgt Bills" but the 24 hour announcement would still be in place for the 10/19 auction. It didn't say if the announcement window will be longer in the future.

CMBs are not available through TreasuryDirect and, according to Boglehead members, not available to Vanguard retail clients.

Hey, hey - the 17 week T-bill showed up on this weeks upcoming auction list!
https://www.treasurydirect.gov/auctions/upcoming/

 

[jldavid47]

I am still not sure how to buy New issues with Schwab. Whenever I go and look there ar very few if no new issues available.

What is the best day to look for 13, 26 and 52 week bonds. And 2 year issues?

When they mature is the money just deposited into one's Schwab Cash account?

The best time to look at new Treasury issues/auctions is Thursday afternoons for those bills/notes. The announcements are generally on either Wednesday or Thursday mornings and Schwab has the auctions listed on their new issues page shortly after that. The actual auctions are usually early the following week so you could look on Friday if you wanted.

The answer to your last question is yes.

One other note. When you see a 2-year (or longer) note auction on the Schwab site it will show up as 0% coupon. Ignore that. It's a placeholder as you will not know the actual coupon until after the auction. For example, the last 2-year note auction showed a 0% coupon when I entered the order. The actual coupon was 4.25% once the auction completed. Hope this helped.

 

[11522914]

We can't predict the future. Everyone has their own ideas on a ladder. Do what you feel comfortable with.

Which is why I've already committed 5.2% of income assets in corporate bonds and CDs with weighted interest rate of 4.55 and 90 month duration. Already I could do much better [emoji848] but how did I know.

Still have 94.8% of funds ready to be deployed [emoji16]

Right now buying 1 month treasuries and Schwab money market funds.

Waiting for the "Golden Period" to buy 5 and 10 year corporate bonds, CDs and preferred stocks.

After this hopefully next Fed rate increase will definitely get some 5 and 10 year whether there is a golden period or not as to your point I can't predict the future.

 

[ShokWaveRider]

Thanks all for promptly answering of my questions and for the links.

 

[joesxm3]

Thanks for the advice and info. I put an order in for some t-bills.

 

[lordjust]

Which is why I've already committed 5.2% of income assets in corporate bonds and CDs with weighted interest rate of 4.55 and 90 month duration. Already I could do much better [emoji848] but how did I know.

Still have 94.8% of funds ready to be deployed [emoji16]

Right now buying 1 month treasuries and Schwab money market funds.

Waiting for the "Golden Period" to buy 5 and 10 year corporate bonds, CDs and preferred stocks.

After this hopefully next Fed rate increase will definitely get some 5 and 10 year whether there is a golden period or not as to your point I can't predict the future.

You think 10 years will be ok ? I am hesitant to buy that far out but only because of the unknown not because i think it is a "bad" idea. I am also 48 years old so... situation may be different... if that even matters here.

 

[JoeWras]

Thanks for the advice and info. I put an order in for some t-bills.

Nice! Always glad to get new people joining the T-bill party. T-bills haven't been this hot since the 90s.

 

[COcheesehead]

You think 10 years will be ok ? I am hesitant to buy that far out but only because of the unknown not because i think it is a "bad" idea. I am also 48 years old so... situation may be different... if that even matters here.

If you build a ladder right there is nothing wrong with 10 year bonds. In a few years they become 5 year, 3 year etc, bonds.
I built a 10 year ladder starting about 5 years ago to bridge us to social security at 70. Once you receive a few coupons you are in the black and can flip out of them into higher yielders or if rates go down, the value will go up.

 

[11522914]

You think 10 years will be ok ? I am hesitant to buy that far out but only because of the unknown not because i think it is a "bad" idea. I am also 48 years old so... situation may be different... if that even matters here.

I want to ultimately build an income portfolio with a duration of ~90 months. That will take me to 70 at which point I will start collecting SS.

So yes our situations are different. I sold all my bond funds this January when it became clear the Fed was going to raise rates.

I would like to get an average interest rate of 5.5 to 6. Of course the huge risk is inflation really takes off and the Fed has to keep raising rates above inflation. It's a risk I'm willing to take.

I do have a nice chunk of change in I Bonds. Some of my old ones are earning 11.30%.

I will continue to keep some powder dry for potentially higher rates.

I also sold my remaining equities in the July run-up locking in a YTD loss. By that time I only had 10% left in equities.

I don't believe I will go back into individual stock equities/etfs and will increase my equity allocation using individual preferred shares or a CEF.

I've learned a lot from Freedom56. I've made plenty of money using stocks/etfs and given this unique opportunity I believe I'm done with them.

I don't need my SS right now to pay the bills but it's always there if times call for it + my wife will start collecting next year. My wife and I live very simply with no debt at all so we don't need a lot of income to enjoy the simple things in life.

I don't recommend this strategy for anyone but it works for me at this time in my life.

One last thing. I have a small Roth with about 12k in it. This will be for highly speculative swing trading [emoji16]

YMMV