Treasury Bills, Notes, and Bonds Discussion

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Meanwhile, the 3 year note drooped significantly from last month's.

Today: 4.00%
Last month: 4.50%

The inversion steepens.
 
JoeWras said:
Meanwhile, the 3 year note drooped significantly from last month's.

Today: 4.00%
Last month: 4.50%

The inversion steepens.
Click to expand...

Not surprised since longer rates, even the 1 year, dropped early last week. Longer rates quite a lot!
 
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I bought the 3mo Treasuries at 4.27% on Friday. Thinking about extending out to a switch strategy involving short term investment grade and 5 yr Treasuries once the dust settles. Not sure how to measure the dust though. :blush:
 
13 week auction results:

CUSIP 912796YL7
Issue date: 12/15/2022
Investment Rate: 4.377%
Price: $98.920639

Interesting, that’s exactly the same price and rate as last Monday. CUSIP and issue date have changed of course.
 
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I split between 13 and 26 weeks this time. Will be interesting to see the 17 week estimates tomorrow.
 
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I've been buying 26 month treasuries and wonder why others buy shorter or longer term. We had a big chunk of cash when a loan we had made paid off and I've been buying every couple weeks since September. Thought about dumping it all in at once, but are lucky enough to have our Marcus savings account jacked up to 4.1% till 11/15/23, so decided to buy incrementally. Don't need the income because we live cheap, so it's a matter of just trying for the biggest number. We're using California as our primary address, so State income tax takes about 10% of our earnings, making a 4% state tax free Treasury about equivalent to a 4.4% CD as well as reducing the Fed tax paid in our highest bracket by a bit.

Any way, I feel I'm pretty reactive, just dealing with things as they present themselves and making the best choice in the moment rather than looking years into the future and acting like that is that. How much of our planning is illusory? Think this is kind of like picking an inflation rate in Firecalc. There are clear eyed folk on here - how are you balancing rates vs. investment time span?
 
People generally have vastly different goals driving their decisions of which fixed income durations to buy.
 
Just bought some TIPS (9128284H0) maturing on 4/15/2023 with YTM 3.32%. With expected inflation at ~5% for the next 4 months, the nominal yield is over 8%. Thought that's extremely good as a short term bond with virtually no risk.
 
calmloki said:
I've been buying 26 month treasuries and wonder why others buy shorter or longer term. We had a big chunk of cash when a loan we had made paid off and I've been buying every couple weeks since September. Thought about dumping it all in at once, but are lucky enough to have our Marcus savings account jacked up to 4.1% till 11/15/23, so decided to buy incrementally. Don't need the income because we live cheap, so it's a matter of just trying for the biggest number. We're using California as our primary address, so State income tax takes about 10% of our earnings, making a 4% state tax free Treasury about equivalent to a 4.4% CD as well as reducing the Fed tax paid in our highest bracket by a bit.

Any way, I feel I'm pretty reactive, just dealing with things as they present themselves and making the best choice in the moment rather than looking years into the future and acting like that is that. How much of our planning is illusory? Think this is kind of like picking an inflation rate in Firecalc. There are clear eyed folk on here - how are you balancing rates vs. investment time span?
Click to expand...

I'm driven by the memory of frantically trying to find CDs when rates dropped at the end of the last rate cycle (late 2018?). I'd been adding CDs prior and all of a sudden rates are dropping and no issues available. 3% on a 5 year became the best available. From then until just this year when rates finally rose again we were all stuck with the 0.1-0.5% rates we all experienced.
Y'all can see the growing inversion in the yield curves... Fed says they're still raising "higher for longer", but the market believes the Fed is cornered/bluffing and long(er) rates are dropping.
So I ladder out to 10 years while rates are up, although I'm naked as everything out there is callable.
Because everything is callable I'll probably still end up with idle cash when rates drop again. But I tried.

If the CD's reach the mythical "5% 5 year non-callable" (something generally available and not a flash in the pan luck driven find), I'll have a little left to get them, but I'm not holding my breath.
 
calmloki said:
I've been buying 26 month treasuries and wonder why others buy shorter or longer term. We had a big chunk of cash when a loan we had made paid off and I've been buying every couple weeks since September. Thought about dumping it all in at once, but are lucky enough to have our Marcus savings account jacked up to 4.1% till 11/15/23, so decided to buy incrementally. Don't need the income because we live cheap, so it's a matter of just trying for the biggest number. We're using California as our primary address, so State income tax takes about 10% of our earnings, making a 4% state tax free Treasury about equivalent to a 4.4% CD as well as reducing the Fed tax paid in our highest bracket by a bit.

Any way, I feel I'm pretty reactive, just dealing with things as they present themselves and making the best choice in the moment rather than looking years into the future and acting like that is that. How much of our planning is illusory? Think this is kind of like picking an inflation rate in Firecalc. There are clear eyed folk on here - how are you balancing rates vs. investment time span?
Click to expand...
I have been extending maturities out to 5 years for about a month. Logic being inflation appeared to peak driving longer rates lower.

But also have purchased treasuries in a step-ladder out 2 years to fund my future spending.
 
Spock said:
I'm driven by the memory of frantically trying to find CDs when rates dropped at the end of the last rate cycle (late 2018?). I'd been adding CDs prior and all of a sudden rates are dropping and no issues available. 3% on a 5 year became the best available. From then until just this year when rates finally rose again we were all stuck with the 0.1-0.5% rates we all experienced.

...
Click to expand...

I recently purchased TIPS to take care of RMD's out some years. Could not resist 2% YTM above inflation. In late 2018 I had purchased a lot of TIPS at about 1% and they come due 4/15/23. That was a good ride.

If people have room in their retirement accounts TIPS are still a decent deal. The 5 year is at 1.45%.
 
calmloki said:
I've been buying 26 month treasuries and wonder why others buy shorter or longer term. We had a big chunk of cash when a loan we had made paid off and I've been buying every couple weeks since September.
Click to expand...



These rates are really changing. I was gonna say if it was me I’d buy 3,6,12 mos etc out to the peak rate which was 2-3 yrs when I checked a week or so ago. As of today the peak seems to be 3-12 months so 26 wks is in the sweet spot. I’d still be looking to lock in some longer terms (5yrs) but that really depends on your needs down the road. Seems like a hassle to reinvest every 26 wks but I guess some brokers have autoroll to make it easy.
 
To all those who have been watching and waiting: ya better be careful.

The CPI data today is having an effect. The 50bp rise expected in December is already baked in. Who knows what Powell will say. He could say: "we're pausing", and if he does, rates will continue to drop.
 
I dunno, the 2 year treasuries are actually down today, meaning yield is higher.
 
I like to look for data patterns. Could history repeat itself? The year 1994 was a well known bad bond market year. But stocks took off at the beginning of 1995 and the 3 month Treasury rise had flattened out. The Fed Funds rate tended to flatten out in early 1995.

Of course the reasons were probably quite different. No pandemic or Russian invasion or bursting inflation. Here is a writeup on the 1994 bond market: https://en.wikipedia.org/wiki/1994_bond_market_crisis

Chart with the right axis showing Tbills and the left SP500, short term investment grade (VFSTX) and total bond market (VBMFX).


image2.jpg



Here is the Fed Funds rate versus the 3 month Tbill:


image4.jpg



Hoping for that great stock and bond market in 2023. :)
 
Fermion said:
I dunno, the 2 year treasuries are actually down today, meaning yield is higher.
Click to expand...

Yield is lower today. The most recent issue 2 year treasury yield closed around 4.39% yesterday, is down to 4.181% currently, a drop of 0.222% according to CNBC.

10 year treasury yield has dropped back under 3.5%.
 
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audreyh1 said:
Yield is lower today. The most recent issue 2 year treasury yield closed around 4.386% yesterday, is down to 4.181% currently, a drop of 0.222%
Click to expand...

Oh, yes looking closer you are totally correct, the bonds are up today even though Fidelity shows them down in my portfolio. When I go to the book screen I get different values.
 
Lsbcal said:
I like to look for data patterns. Could history repeat itself? The year 1994 was a well known bad bond market year. But stocks took off at the beginning of 1995 and the 3 month Treasury rise had flattened out. The Fed Funds rate tended to flatten out in early 1995.

Of course the reasons were probably quite different. No pandemic or Russian invasion or bursting inflation. Here is a writeup on the 1994 bond market: https://en.wikipedia.org/wiki/1994_bond_market_crisis
Click to expand...

Who knows? It is worth looking at.

One other similar analog I see is housing. Housing rose through the 80s and then cooled in the early 90s. We still have more "cooling" to match that situation, which was about 4 year long, but there are echos. (I remember this well since I bought at the peak.)

The other thing about the first half of the 90s was employment was different. We had an early 90s recession, and really nasty unemployment followed. I know we are hearing about tech layoffs, but so far they've been nothing like the early 90s. By the mid 90s, things turned around and I switched jobs. Tech wages were skyrocketing, along with the market on expectations of tech and other industries.

Is there that kind of optimism now? What about employment?

Again, not pooh-poohing your idea. It's just that "This Time It Is Different" (tm)
 
JoeWras said:
To all those who have been watching and waiting: ya better be careful.

The CPI data today is having an effect. The 50bp rise expected in December is already baked in. Who knows what Powell will say. He could say: "we're pausing", and if he does, rates will continue to drop.
Click to expand...
I would be very surprised if they gave any indication of pausing after their meeting ends tomorrow. They’ve only just now indicated a pull back from 0.75 to 0.5. Still early in the fighting inflation catch up game IMO.

Of course markets will keep wishing and hoping……
 
audreyh1 said:
I would be very surprised if they gave any indication of pausing after their meeting ends tomorrow. They’ve only just now indicated a pull back from 0.75 to 0.5. Still early in the fighting inflation catch up game IMO.

Of course markets will keep wishing and hoping……
Click to expand...

Well I agree, but still say "who knows" which I why I've been laddering for nearly a year now. I'm not waiting for nothing, just rotating those rungs and letting Powell do Powell things.

I'm just amazed at all the people sitting on the sidelines waiting to hear what this guy says first.
 
zd500 said:
Just bought some TIPS (9128284H0) maturing on 4/15/2023 with YTM 3.32%. With expected inflation at ~5% for the next 4 months, the nominal yield is over 8%. Thought that's extremely good as a short term bond with virtually no risk.
Click to expand...
Looks good. How did you calculate the nominal yield is over 8% ?
 
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