Treasury Bills, Notes, and Bonds Discussion

[MarieIG]

I opened an account Friday; and DS #3 opened one Saturday. Whether or not they will be successfully funded I won't know until tomorrow. DS#5 was locked out of his account and attempted five times (unsuccessfully) to get through to TD. Says he doesn't know that it is worth it. So, results are pending. . .

The money was OUT first thing this morning. Funny, when I try to transfer my money from me to me, it seems to take forever to get it out and then forever to clear. When the gommit comes a'knocking (usually for taxes tho) the banks don't seem to play games with them (not that I want that).

 

[MarieIG]

Well, you can sit down to sort out your bonds according to their maturity. Voilà, some organization. Then, see what rungs you need to fill in to complete your ladder.

The real question is how long a ladder does one want. Just a step ladder, or an extension 24-footer.

Currently, everything is short term. I am going to attempt to take a week off from buying bonds and let everything settle down, and then start working on the lists. I am going to have to be careful to keep enough free cash in my IRA to be flexible, while eking out some extra interest.

My house account I will keep very short term (three months or less) and my IRA, I will for the most part keep w/n six months.

But the real question which I am trying to decide is whether I want to tie money up long term (in a taxable) to generate income rather like annuity payments. . .

 

[jldavid47]

So a bill is a zero.

https://www.treasurydirect.gov/marketable-securities/

Everything you need to know is there.

 

[MarieIG]

It is amazing how low my "cash not committed" (to T-Bills, Ally $500 offer, etc.) are getting.

It really is just a function of the run up in rates. When CD's were yielding next to nothing, I started to get sloppy. After all, getting .7% and tying it up multiple years in a CD really wasn't worth it, so better to just keep a lot higher cash on hand number.

Now things have changed, and even though we are losing out in real return due to inflation, it has become much more important to chase returns.

Now, to find some more cash in the sofa cushions...

Precisely!

 

[jldavid47]

The bond ladder is a result of NOT being able to time the market. While I have my suspicions, I have no way of knowing if the 5 year CD or bonds will top out at 6%, 8% or 14%. So, the ladder is actually a way of dealing with the reality that I know I can't accurately time the market. I'll let the chest thumping experts time the market all they want.

IOW, I don't see a CD ladder as being all that different from dollar cost averaging into a stock index fund.

+1

Constructing a bond/bill/note/CD ladder this year is also a trend following method. The trend in rates is up. If you are following the trend you should tend to keep maturities short. As rates rise you should (but may not) do better as the instruments mature.

My ladder is not evenly spread and is not uniformly short. It's pretty much weekly for the next 6 months then monthly for the following 6 months with additional rungs 20-30 months out. I have a spreadsheet to manage it (there are actually three ladders, one for my IRA, one for my wife's IRA and one for our taxable account) with a plan for entering upcoming treasury auctions for the next 3 months.

So, while I have a large number of rungs in each account, there is a plan that is being followed and it is well organized. I have to admit that in the beginning (back in February/March) I was getting my feet wet and it was more haphazard. I purchased a few maturities I now regret but, whatever. The length and breadth of the trend was much more unclear at that time. Live and learn.

 

[audreyh1]

Today’s auction: seems very likely that the 13-week new issue will exceed 4%, and the 26-week might even cross 4.5%. Just guessing.

Yep!

Today’s auction results:

13-week 4.097%
26-week 4.552%

Bills	CMB	CUSIP	Issue Date	High Rate	Investment Rate	Price per $100
13-Week	No	912796S34	10/27/2022	4.000%	4.097%	$98.988889
26-Week	No	912796YV5	10/27/2022	4.390%	4.552%	$97.780611

https://www.treasurydirect.gov/auctions/upcoming/

 

[jldavid47]

Yep!

Today’s auction results:

13-week 4.097%
26-week 4.552%

I grabbed some 26-week at this auction. I'm also in the 2-year auction tomorrow. I'm expecting between 4.55% and 4.65%. We'll see.

Before anybody asks "Why would I buy some 2-year notes at 4.55% when I could get 6-month bills at the same rate?" let me explain. I always look at my ladder from a strategic, not tactical perspective. While I think interest rates will continue to rise (perhaps significantly) I have no idea if it will actually happen. I may look like an idiot or a genius in a year. What I do know is that I am willing to lock up one rung of my 35 rung ladder tor 2 years at 4.55% (or so). I have no crystal ball. All I know is what I'm willing to accept at this time with 3% of my income allocation and I'll live with my decision no matter what because it fits into the bigger picture.

 

[Another Reader]

Shoulda bought more... Next round!

 

[JoeWras]

I got in on the 26wk as I'm starting to lengthen my ladder, and I have 13s rolling off providing the funds.

Was looking and see a rung missing in late Feb. I'm going to hit the 17wk next and see what happens. Where will it land?

 

[audreyh1]

I got in on the 26wk as I'm starting to lengthen my ladder, and I have 13s rolling off providing the funds.

Was looking and see a rung missing in late Feb. I'm going to hit the 17wk next and see what happens. Where will it land?

Likely above 4.25%.

Treasury.gov publishes a secondary market reading on T-bills near the end of each trading day:
https://home.treasury.gov/resource-..._bill_rates&field_tdr_date_value_month=202210

 

[Montecfo]

I grabbed some 26-week at this auction. I'm also in the 2-year auction tomorrow. I'm expecting between 4.55% and 4.65%. We'll see.

Before anybody asks "Why would I buy some 2-year notes at 4.55% when I could get 6-month bills at the same rate?" let me explain. I always look at my ladder from a strategic, not tactical perspective. While I think interest rates will continue to rise (perhaps significantly) I have no idea if it will actually happen. I may look like an idiot or a genius in a year. What I do know is that I am willing to lock up one rung of my 35 rung ladder tor 2 years at 4.55% (or so). I have no crystal ball. All I know is what I'm willing to accept at this time with 3% of my income allocation and I'll live with my decision no matter what because it fits into the bigger picture.

I think people should begin extending maturities. As attractive as these ST rates are, and I have plenty, they are just that.

And the peak is coming. Headline rate ignores that inflation is down sharply from rate of prior months.

I tend to think we have hit peak inflation, and Fed will catch up pretty soon. I am not suggesting we go quickly back to 2 pct.

Once it is clear Fed is done or nearly so, you are going to see long-end yields tighten.

At least that is my thinking.

 

[JoeWras]

I think people should begin extending maturities. As attractive as these ST rates are, and I have plenty, they are just that.

And the peak is coming. Headline rate ignores that inflation is down sharply from rate of prior months.

I tend to think we have hit peak inflation, and Fed will catch up pretty soon. I am not suggesting we go quickly back to 2 pct.

Once it is clear Fed is done or nearly so, you are going to see long-end yields tighten.

At least that is my thinking.

Yeah, we really don't know. I'm done with 13s. It is 26s, 52s and some 2 year notes. I'm not ready to go longer than that.

 

[audreyh1]

When my 6 month t-bills start maturing next year I’ll be re-evaluating the landscape.

 

[jazz4cash]

I think people should begin extending maturities. As attractive as these ST rates are, and I have plenty, they are just that.

That’s what I am doing but maybe for different reasons. CDs are topping Treasuries now too but many are callable. 2-3 years looks good to me now but I’ll gladly go out 5 years. My ladder steps are pretty small so It’s not a huge difference.

 

[jldavid47]

Yeah, we really don't know. I'm done with 13s. It is 26s, 52s and some 2 year notes. I'm not ready to go longer than that.

26s, 52s and 2 year notes are exactly what's in my purchase/roll plan over the next 3 months.

Either we are both brilliant or both stupid.

 

[NW-Bound]

I don't have any ladder, or rather my ladder is more like a stepping stool:

I am down to 64% in stock AA, and the rest is in the following: BlackRock T-Fund TSTXX, I bond, Stable Value Fund, and stinkin' brokerage sweep fund.

But for the 1st time, I want to know the combined yield of this stepping tool mess, so just sat down to compute it: it's 3.8%!

And if I move all of the stinkin' sweep fund into TSTXX, then the total yield will be 4.55%.

Then, I only lose 4% to inflation. Uh, I forget about the darn tax!

 

[Graybeard]

I think people should begin extending maturities. As attractive as these ST rates are, and I have plenty, they are just that.

And the peak is coming. Headline rate ignores that inflation is down sharply from rate of prior months.

I tend to think we have hit peak inflation, and Fed will catch up pretty soon. I am not suggesting we go quickly back to 2 pct.

Once it is clear Fed is done or nearly so, you are going to see long-end yields tighten.

At least that is my thinking.

I have been buying 13 week T bills each week. First in my IRA, the next week in my taxable and the 1st purchase will mature around the 2nd or 3rd week in December. At that point, I am wondering if the maturing 13 week money should be invested in 26 week bills. It seems at some point rates will stop rising, they may not drop but extending the reinvested 13 week bills into 26 week bills may look like a good move by the end of 1Q23. I'm pretty excited at the 4.097% yield today!

 

[JoeWras]

17 weeks auction just opened up and the window is small because the auction is tomorrow.

"T-Bills, T-Bills, get yer red hot T-Bills here! Gotta collect them all*."

* - Stolen from calmloki

 

[calmloki]

Cusip for the 17 week is 912796Y78

I went to Fidelity and Vanguard hunting it this morning and found nothing, but it popped up later on Vanguard and I got an order in. Was it Beanie Babies or Pokemon that had the "gotta collect them all" tag?

 

[audreyh1]

By afternoon of the announcement day Treasuries should be available to order from the various brokerages. Not much point checking early morning before the announcement.

The treasuries with offering amount specified and links to details are the ones that have been announced.
https://www.treasurydirect.gov/auctions/upcoming/

 

[JoeWras]

"gotta collect them all"

Quote stolen.

 

[jldavid47]

I grabbed some 26-week at this auction. I'm also in the 2-year auction tomorrow. I'm expecting between 4.55% and 4.65%. We'll see.

Actual yield came in at 4.46%. 4-3/8% coupon at a price of $99.839071. That's still 0.17% better yield than the 4.29% yield at the last auction in September.

 

[Rianne]

On the VG bond page, there are "agencies" which are defined as government agencies. Right now, there are agency bonds at 5.25% for 2 years. Is anyone buying these?

 

[lawman]

On the VG bond page, there are "agencies" which are defined as government agencies. Right now, there are agency bonds at 5.25% for 2 years. Is anyone buying these?

I've bought some through Schwab and plan to buy a lot more in about another month.

 

[disneysteve]

On the VG bond page, there are "agencies" which are defined as government agencies. Right now, there are agency bonds at 5.25% for 2 years. Is anyone buying these?

I actually just did. I got that "5.25% for 2 years". It was actually 5.180% and matures in 5/24 so just under 19 months. It is callable in 2/23 and yield to call is 4.845% so not too bad if it does get called.