Treasury Bills, Notes, and Bonds Discussion 2024+

[Another Reader]

I confess that I gave up on the 52 week T-bill a week ago and got a brokered CD instead.

I bought some brokered CD's but I wasn't really happy with those either. I think we are going to have to settle for lower rates and shorter terms for now.

 

[audreyh1]

Why and what term brokered CD did you end up getting?

I ended up going with the JP Morgan 5.35% 1Yr callable after 6 months. It was either that or a 26-week T-bill and I already have a bunch of those.

 

[Another Reader]

I ended up going with the JP Morgan 5.35% 1Yr callable after 6 months. It was either that or a 26-week T-bill and I already have a bunch of those.

I went with Wells Fargo. 9 and 12 months, non callable, 5.25 percent.

 

[Another Reader]

I also keep cash in online banks. Their CD rates have been a little lower, 5.0 to 5.15 percent. Even Wells Fargo offers a 7 month "relationship CD" at 5.01 percent to some customers.

 

[jldavid47]

In our taxable account I am in the 52 week auction today. Even at 5.1% we will be better off than purchasing a 12 month CD at 5.25% (highest this morning at Schwab) after accounting for state taxes (breakeven would be 4.98% on a treasury for us). In retirement accounts I'm buying CDs.

 

[bpgdeg1234]

In our taxable account I am in the 52 week auction today. Even at 5.1% we will be better off than purchasing a 12 month CD at 5.25% (highest this morning at Schwab) after accounting for state taxes (breakeven would be 4.98% on a treasury for us). In retirement accounts I'm buying CDs.

Vanguard VUSXX Treasury MM fund is yielding 5.27% which is even better than the 52-week treasury if that garners say only 5.1x% at the auction today as both are state tax free in a taxable account.

I was debating going with the lower auction 52-week treasury yield but locked in for the full 52-week term versus sticking with the higher VUSXX yield and increased liquidity but not guaranteed for the entire 52-week term (which could be a negative or positive TBD).

 

[PaunchyPirate]

I decided to buy one more 52-week T-bill today in both my taxable and IRA account. I've been transitioning to more CDs in the IRA, however.

 

[Midpack]

Vanguard VUSXX Treasury MM fund is yielding 5.27% which is even better than the 52-week treasury if that garners say only 5.1x% at the auction today as both are state tax free in a taxable account.

I was debating going with the lower auction 52-week treasury yield but locked in for the full 52-week term versus sticking with the higher VUSXX yield and increased liquidity but not guaranteed for the entire 52-week term (which could be a negative or positive TBD).

I bought a bunch today as I'd rather have the 5.16% bird in hand (52 wk treasury) as I think the odds are MM yields will fall over the same period. But you may be right...

 

[jldavid47]

By the way, the 5.155% "investment rate" on the 52-week today translates to a 5.221% APY. (For those of you that like to play with spreadsheets use the YIELDDISC function. In reality, your investment will rise by 5.207% since 52 weeks is a day shorter than a year). When you compare money market (which report 7-day yields) and CD yields to Treasuries you need to take that into consideration.

 

[jldavid47]

I bought a bunch today as I'd rather have the 5.16% bird in hand (52 wk treasury) as I think the odds are MM yields will fall over the same period. But you may be right...

Buying a 52-week T-bill is a hedge against MM rates falling. I like to diversify over time because even though I have an opinion as to where rates will be over the next year, Mr. Market doesn't care what my opinion is. This week I'm in the 8, 26 and 52-week auctions in our taxable account. Right now I'm happy with any 52-week "investment rate" over 5.1%. If the 2-year note goes back over 5%, I'll be in that auction as well. YMMV.

 

[audreyh1]

Based on the JP Morgan callable CD offerings I suspect JP Morgan thinks rates are likely to be higher in 6 months. But whatever.

 

[audreyh1]

By the way, the 5.155% "investment rate" on the 52-week today translates to a 5.221% APY. (For those of you that like to play with spreadsheets use the YIELDDISC function. In reality, your investment will rise by 5.207% since 52 weeks is a day shorter than a year). When you compare money market (which report 7-day yields) and CD yields to Treasuries you need to take that into consideration.

I’m pretty sure that investment rate is equivalent to APY or extremely close. It’s the high rate that has to be adjusted.

 

[jldavid47]

Based on the JP Morgan callable CD offerings I suspect JP Morgan thinks rates are likely to be higher in 6 months. But whatever.

I suspect you are correct. But, as you said, whatever. It doesn't matter what anybody thinks about the direction of rates (including JPM). All you can do is manage your maturities to mitigate some of the "falling rate" risk which is prudent even if that risk doesn't materialize. None of us have a crystal ball.

 

[jldavid47]

I’m pretty sure that investment rate is equivalent to APY or extremely close. It’s the high rate that has to be adjusted.

If that was the case then the simple interest would not be higher (5.207%) than the investment rate (5.155%).

 

[Midpack]

Buying a 52-week T-bill is a hedge against MM rates falling. I like to diversify over time because even though I have an opinion as to where rates will be over the next year, Mr. Market doesn't care what my opinion is. This week I'm in the 8, 26 and 52-week auctions in our taxable account. Right now I'm happy with any 52-week "investment rate" over 5.1%. If the 2-year note goes back over 5%, I'll be in that auction as well. YMMV.

Agreed. Though I bought a bunch of 52 week T-bills today, we also have a bunch in 26 week. I was buying 8, 13 & 26 week T-bills starting in Oct 22 (whatever was the highest yield when funds became available), and only more recently all 26 & 52 now that rates have settled somewhat. May go even longer in the months ahead.

 

[momoney]

Is something like Wisdomtree Floating Rate Treasury Fund USFR, better than a Fidelity money market fund when you factor in expense ratio and state taxes on the money market fund?

USFR - Wisdomtree Floating Rate Treasury Fund
Gross expense ratio .15
30 Day Yield 5.33%

SPRXX - Fidelity MM
Gross expense ratio .42
7 Day Yield 5.03%

https://www.marketwatch.com/investing/fund/usfr

 

[xlf11]

Be careful of the floating rate ETF when Fed rate is dropping:

https://www.reddit.com/r/bonds/comments/1am2r49/how_do_you_think_usfr_tflo_and_flot_will_do_in_a

 

[momoney]

Be careful of the floating rate ETF when Fed rate is dropping:

https://www.reddit.com/r/bonds/comments/1am2r49/how_do_you_think_usfr_tflo_and_flot_will_do_in_a

So stick with a 3-6 month treasury?

Understanding This Table	3mo	6mo	9mo	1yr	2yr	3yr	5yr	10yr	20yr	30yr+
CDs (New Issues)	5.35%	5.30%	5.35%	5.40%	5.25%	5.25%	5.30%	5.00%	--	--
BONDS​
U.S. Treasury	5.39%	5.38%	5.26%	5.16%	4.84%	4.64%	4.48%	4.45%	4.71%	4.61%

 

[xlf11]

Or longer CDs if no State income tax

 

[savory]

Apologies upfront if this has already been discussed.

As many did a few months ago, I sold my bond funds and am now in individual bonds. BTW, at least for now, I really feel good about it and think I have built a fair understanding of the buying discipline for bonds. Famous last words.

As I begin to rebuild my ladder for 2028 and beyond, the same banks that I am invested in already appear to be the best choice. Buying more of the bonds from the same company, means buying more risk.

These are good companies, like the Royal Bank of Canada, that likely won’t default. Having said that, I know I could reduce that risk by buying a similar but lower returning bond or one with a less advantaged call date.

So I am wondering if in the bond world there is a recommendation for limiting investing in one company as a percentage of total assets, bond portfolio or other measurement of your bond portfolio? If no popular recommendation, what rules do you follow.

Thanks

 

[Chuckanut]

IIRC, Bob Brinker, who uses to have a nationwide radio show that discussed personal investments, believed the typical small investor should have no more than 4% of their assets in one stock.

I would think the same would be true for corporate and even local and state bonds, though I never heard Mr. Brinker say that.

But, this thread is about USA Federal bonds, bills and notes, so the above would not matter since you are loaning money to the guys who own the money printing press. Inflation? Well, that’s another story.

 

[audreyh1]

This week’s T-Bill auction results:

Bills CMB CUSIP Issue Date High Rate Investment Rate Price per $100 4-Week No 912797KF3 05/21/2024 5.270% 5.365% $99.590111 8-Week No 912797KP1 05/21/2024 5.270% 5.387% $99.180222 13-Week No 912797KB2 05/16/2024 5.250% 5.395% $98.672917 17-Week No 912797LH8 05/21/2024 5.235% 5.401% $98.269542 26-Week No 912797LD7 05/16/2024 5.165% 5.377% $97.388806 52-Week No 912797LB1 05/16/2024 4.895% 5.155% $95.050611

 

[pb4uski]

Apologies upfront if this has already been discussed.

As many did a few months ago, I sold my bond funds and am now in individual bonds. BTW, at least for now, I really feel good about it and think I have built a fair understanding of the buying discipline for bonds. Famous last words.

As I begin to rebuild my ladder for 2028 and beyond, the same banks that I am invested in already appear to be the best choice. Buying more of the bonds from the same company, means buying more risk.

These are good companies, like the Royal Bank of Canada, that likely won’t default. Having said that, I know I could reduce that risk by buying a similar but lower returning bond or one with a less advantaged call date.

So I am wondering if in the bond world there is a recommendation for limiting investing in one company as a percentage of total assets, bond portfolio or other measurement of your bond portfolio? If no popular recommendation, what rules do you follow.

Thanks

I see you started another thread on this issue and I posted a response.