Treasury Bills, Notes, and Bonds Discussion

[RetiredAndLovingIt]

Thanks for the info Joe. I've been considering notes but still not sure if I understand so I will follow your reports until I'm more comfortable.

 

[JoeWras]

Thanks for the info Joe. I've been considering notes but still not sure if I understand so I will follow your reports until I'm more comfortable.

Yes, I understand. It is one step up in complexity from Bills. It is a Bond, just shorter term compared to the Treasury long bonds. The next step in complexity are TIPS.

One thing you can do is buy $1000 (or less at Treasury Direct) on a 2 year note. This helps gain understanding of how they work. In other words, just dip a toe in the water.

 

[copyright1997reloaded]

This week’s T-bill auction results.

Bills	CMB	CUSIP	Issue Date	High Rate	Investment Rate	Price per $100
4-Week	No	912797HD2	10/03/2023	5.290%	5.400%	$99.588556
8-Week	No	912797HM2	10/03/2023	5.330%	5.464%	$99.170889
13-Week	No	912796ZN2	09/28/2023	5.330%	5.493%	$98.652694
17-Week	No	912797JB4	10/03/2023	5.345%	5.532%	$98.233181
26-Week	No	912797GY7	09/28/2023	5.315%	5.553%	$97.312972

I’m participating in Monday’s 26-week auction. This is to replace a 6 month CD bought during the bank scare 6 months ago. That depressed T-bill rates for a while, and banks on the other hand raised the CD rates they were offering. That little upset lasted about a month.

Same here, I'm planning on buying some of the 26-week and 52-week issues. I have a T-Note bought in early December 2022 that is maturing on Saturday, it had a YTM of 4.7%. Just a few of those "under 5%" items remaining that i had bought late 22 to fill out my relatively short term ladder.

 

[Midpack]

Just bought another 26 week T-Bill and my weighted average rate just pushed over the 5 mark to 5.158%. Yippee! Enjoy it while it lasts, though I don't think it will end anytime soon.

 

[pb4uski]

I don't really think that the yields that are indicated by Treasury Direct are really correct.

For example, on 09-26-2023 I bought a 17-Week Bill; par value $10,000 and I paid $9,823.48.

The Security History Detail indicates an Investment/Interest Rate of 5.527% and a Yield of 5.340% and a discount of $176.52 ($10,000-$9,823.48).

Issue date was 09-26-23 and maturity date is 01-23-2024.

I can recalculate the 5.527% Investment/Interest Rate as =((100-98.234833)/98.234833)*(366/(maturity date-issue date)) which is the formula that is provided on the Treasury Direct website.

However, if I use Excel's RATE function, I get 5.614% =RATE((maturity date-issue date)/365,0,-98.234833,100)

So I think that I'm really getting a 5.614% yield rather that what is shown by Treasury Direct.

Put another way, I'm getting 1.79691% ($176.52 discount divided by $9,823,48 cost) for 119 days (01/23/2024 maturity - 09/26/2023 issue date).

((1+1.79691%)^(365/119))-1 = 5.614%... the same as the RATE calculation result.

Other than I have too much time on my hands, any thoughts?

 

[Phroig]

I don't really think that the yields that are indicated by Treasury Direct are really correct.

For example, on 09-26-2023 I bought a 17-Week Bill; par value $10,000 and I paid $9,823.48.

The Security History Detail indicates an Investment/Interest Rate of 5.527% and a Yield of 5.340% and a discount of $176.52 ($10,000-$9,823.48).

Issue date was 09-26-23 and maturity date is 01-23-2024.

I can recalculate the 5.527% Investment/Interest Rate as =((100-98.234833)/98.234833)*(366/(maturity date-issue date)) which is the formula that is provided on the Treasury Direct website.

However, if I use Excel's RATE function, I get 5.614% =RATE((maturity date-issue date)/365,0,-98.234833,100)

So I think that I'm really getting a 5.614% yield rather that what is shown by Treasury Direct.

Put another way, I'm getting 1.79691% ($176.52 discount divided by $9,823,48 cost) for 119 days (01/23/2024 maturity - 09/26/2023 issue date).

((1+1.79691%)^(365/119))-1 = 5.614%... the same as the RATE calculation result.

Other than I have too much time on my hands, any thoughts?

TD seems to report discrete (simple) interest. Your computation and the Excel function assume continuous compounding.

 

[JoeWras]

We're also in the 366 zone until next March 1. Using 365 will break results.

 

[audreyh1]

We're also in the 366 zone until next March 1. Using 365 will break results.

Right!

 

[Spock]

Question on Treasury auctions:
Looking at the auction schedule https://home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf
The 10Y announcing on Oct 5 will be a re-issue.
And the 10Y announcing on Nov 1 will be a new issue.
The re-issue will have the same coupon rate as when originally issued.
What is the likelyhood the Nov1 new issue will have a higher coupon in line with increased rates? Or does the coupon typically stay flat-ish across issues and the difference is made up in the lower price?

T's have been competitive with similar term CD's lately so I was leaning towards Ts as they are more liquid... but I need the coupons for cash flow.

 

[copyright1997reloaded]

Question on Treasury auctions:
Looking at the auction schedule https://home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf
The 10Y announcing on Oct 5 will be a re-issue.
And the 10Y announcing on Nov 1 will be a new issue.
The re-issue will have the same coupon rate as when originally issued.
What is the likelyhood the Nov1 new issue will have a higher coupon in line with increased rates? Or does the coupon typically stay flat-ish across issues and the difference is made up in the lower price?

T's have been competitive with similar term CD's lately so I was leaning towards Ts as they are more liquid... but I need the coupons for cash flow.

The new issues are typically set with coupons so that they price a little under par.

 

[JoeWras]

The new issues are typically set with coupons so that they price a little under par.

Right. Coupon is to the nearest 1/8%, and discount from par makes up for any difference in the auction.

Spock should probably wait, therefore, for new issue max coupon since the reopen should have a nice discount instead of higher coupon. But there's always a risk some shock event occurs to mess with the market before Nov 1.

 

[jldavid47]

The coupon for the reissue is the same as the original coupon (3-7/8%) with the same maturity date (8/15/33). You are buying the same note (CUSIP 91282CHT1) with 2 months less to maturity (9 years, 10 months). The price you pay will be discounted to reflect the current market yield on a 9 year, 10 month note. The reissue last month (9 years, 11 months) was priced at $96.678677. I'd guess given how 10-year rates have risen the price will be even lower for this reissue. You also need to pay accrued interest at the time of purchase as you will be getting a full 6 months of interest on 2/15/24 but will have held the note for only 4 months. The accrued interest will probably be $6.52854 per $1,000.

 

[audreyh1]

This week’s T-bill auction results:

Bills	CMB	CUSIP	Issue Date	High Rate	Investment Rate	Price per $100
4-Week	No	912797HJ9	10/10/2023	5.310%	5.421%	$99.587000
8-Week	No	912797HN0	10/10/2023	5.355%	5.490%	$99.167000
13-Week	No	912797FW2	10/05/2023	5.345%	5.509%	$98.648903
17-Week	No	912797JC2	10/10/2023	5.350%	5.537%	$98.231528
26-Week	No	912797GZ4	10/05/2023	5.340%	5.580%	$97.300333
52-Week	No	912797GW1	10/05/2023	5.185%	5.488%	$94.757389

 

[11522914]

Wow, jobs blew past expectations. Consensus 160k, Actual 336k. Prior 187k, adjusted to 227k. Very strong report. Private payrolls 150k, Actual 263k.

10 year Treasury responded strongly, up 13 basis points so far to 4.839% according to CNBC, nearing a 16 year high. This will slam high duration bond funds. Crazy.

 

[jldavid47]

Wow, jobs blew past expectations. Consensus 160k, Actual 336k. Prior 187k, adjusted to 227k. Very strong report. Private payrolls 150k, Actual 263k.

10 year Treasury responded strongly, up 13 basis points so far to 4.839% according to CNBC, nearing a 16 year high. This will slam high duration bond funds. Crazy.

And the 30 year is over 5% right now (TYX is at 50.30 as I write this or 5.03%).

 

[Spock]

Wow, jobs blew past expectations. Consensus 160k, Actual 336k. Prior 187k, adjusted to 227k. Very strong report. Private payrolls 150k, Actual 263k.

10 year Treasury responded strongly, up 13 basis points so far to 4.839% according to CNBC, nearing a 16 year high. This will slam high duration bond funds. Crazy.

Look at the past job numbers going back to 2021. Just about every month, there are a few exceptions) the BLS announces blow out job numbers and revises previous month numbers down. One article I read that claimed all the the 2021 job increases where wiped out by subsequent downward revisions (I can't find the article back... it's been archived behind a paywall). The BLS has been politicized such that non-MSM news sites are not taking them seriously any more.

 

[MichaelB]

Look at the past job numbers going back to 2021. Just about every month, there are a few exceptions) the BLS announces blow out job numbers and revises previous month numbers down. One article I read that claimed all the the 2021 job increases where wiped out by subsequent downward revisions (I can't find the article back... it's been archived behind a paywall). The BLS has been politicized such that non-MSM news sites are not taking them seriously any more.

Sorry, but this is not correct. The BLS tracks adjustments and publishes them here.

Revisions in 2021 were overwhelmingly positive, the mean upward revision was 181k per month. Revisions in 2022 were slight but the mean was still positive by around 28k per month.

In other words, BLS revised numbers most often showed even more new jobs than when first reported.

These numbers are scrutinized by just about every major university economics department and think tank in the country, along with most hedge funds and many institutional investors. Their credibility is not in question.

 

[JoeWras]

As the day wears on, "The Market" is having a hard time digesting this information.

First blush was: Bam, there goes a rate hike for sure. Bond yields follow.

Then as the news is digested, the murmur is: Maybe we'll have a soft landing. And stocks take off and bond yields relax.

Interesting day!

 

[Montecfo]

Yes It was was "soft landing" type of report. Jobs strong, wage growth muted. Only real issues were work hours flat and unemployment stayed the same after predicted drop.

Will that last? Who knows but that narrative is back.

 

[audreyh1]

This week’s T-bill auction results:

Bills	CMB	CUSIP	Issue Date	High Rate	Investment Rate	Price per $100
4-Week	No	912797HK6	10/17/2023	5.325%	5.436%	$99.585833
8-Week	No	912797HU4	10/17/2023	5.345%	5.480%	$99.168556
13-Week	No	912797GC5	10/12/2023	5.340%	5.503%	$98.650167
17-Week	No	912797JD0	10/17/2023	5.355%	5.542%	$98.229875
26-Week	No	912797HF7	10/12/2023	5.320%	5.558%	$97.310444

 

[JoeWras]

And the Notes:

Security Term CUSIP Reopening Issue Date Maturity Date High Yield Interest Rate
10-Year 91282CHT1 Yes 10/16/2023 08/15/2033 4.610% 3.875%
3-Year 91282CJC6 No 10/16/2023 10/15/2026 4.740% 4.625%

 

[audreyh1]

5-year TIPS auction this week:

The U.S. Treasury on Thursday will auction $22 billion in a new 5-year Treasury Inflation-Protected Security, and the results should be attractive for investors seeking protection from future inflation. It should generate the highest real yield to maturity for any auction of this term in 15 years.

This is CUSIP 91282CJH5, which will mature Oct. 15, 2028. The $22 billion auction size is the largest ever for this term, up from $21 billion for similar auctions in October 2022 and April 2023. The coupon rate and real yield to maturity will be set by the auction results.

From TIPSwatch https://tipswatch.com/2023/10/15/th...uction-offers-a-solid-investment-opportunity/

 

[Golden sunsets]

Auction Cutoff time

Can anyone tell me, what the cutoff time is to enter a buy order, on the day that a 52 week Treasury goes to auction on Fido? I have a Treasury that comes due 10/31/23, the proceeds of which will be available to trade that morning, or perhaps 12:01 AM on that day. I want to roll it into a new 52 week bill that will be auctioned on 10/31/23. Will I have enough time to use those maturing funds to roll into the new bill, or should I transfer $$ into Fido to cover the purchase and hit buy prior to 10-31?

 

[audreyh1]

Can anyone tell me, what the cutoff time is to enter a buy order, on the day that a 52 week Treasury goes to auction on Fido? I have a Treasury that comes due 10/31/23, the proceeds of which will be available to trade that morning, or perhaps 12:01 AM on that day. I want to roll it into a new 52 week bill that will be auctioned on 10/31/23. Will I have enough time to use those maturing funds to roll into the new bill, or should I transfer $$ into Fido to cover the purchase and hit buy prior to 10-31?

It’s a small window I don’t know for sure. But certainly before 8 maybe 9 eastern. You might want to call about this.

 

[Chuckanut]

5-year TIPS auction this week:

From TIPSwatch https://tipswatch.com/2023/10/15/th...uction-offers-a-solid-investment-opportunity/

Thanks.

Now, let’s hope the fixed rate on Ibonds gets a boost to at least 1.5%.