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Treasury bills are often a rate leader when compared to low minimum liquid deposit accounts. The rates from recent T-bill auctions are listed in the Quick Summary and can also be found on tbillsheet. Thanks to all the contributors who keep the Quick Summary and tbillsheet updated!

The tax equivalent APY can be significantly higher based on your state tax rate. (See quick summary.)

The minimum investment is $1000, in $1000 increments. The bill can be sold at anytime, but before maturity you'll get a market-based value and likely have to pay a fee when you sell. If you hold it to maturity, the value will be preserved and you'll get the stated interest. The interest will not fluctuate if you hold it to maturity. T- bills can be purchased directly from the government (through TreasuryDirect) or from many brokers. They are free to buy on TreasuryDirect and there are no fees if you keep them to maturity. If you sell them prior to maturity, TreasuryDirect charges a $45 fee per security.

Disclosure

I have limited first hand experience with T-bills. I live in a state tax free state and my time horizon for investments has generally become longer than 6 months during the existance of this thread. However, we have many contributors to this thread who have extensive T-bill experience.

Comparison to savings accounts:
- T-bills can be purchased and sold at any time
- Fairly low minimum ($1000), although there are many no-minimum savings accounts
- Unlike savings accounts with fluctuating interest, the interest is guaranteed for the term of the bill; however, there is no opportunity for the rate to rise when held to maturity. Should T-bill yields rise further, and you sell, you'll get a lower price for the bill than if rates had stayed the same (or fell). If market yields do fall, you can command a higher price if you sell.
- Currently, APY is comparable to high yield savings accounts with similarly low minimum. Tax equivalent APY (state and local tax free) may be higher than savings accounts, depending on your situation.
- Savings accounts are insured up to certain FDIC and NCUA limits; with Treasury securities, the sky is the limit.


Comparison to CDs:
- Guaranteed rate if held to maturity
- More liquid than a CD (typically CDs have interest loss if closed early, T-bills do not although seller fees apply and the selling price would be market-based with no guarantee of the principal)
- Easier to open/purchase than a CD
- APY is lower than the highest yield CDs available (5-6%). However, the liquidity makes it act more like a savings account with a guaranteed rate than a CD. Tax equivalent APY (state and local tax free) may be higher than comparable term CDs, depending on your situation.
- CDs are insured up to certain FDIC and NCUA limits; with Treasury securities, the sky is the limit.


Tax Considerations:
- Interest income is exempt from state- and local income taxes.
- Interest income is subject to federal income tax.

Safety of Investment:
- Treasury bills, along with the other Treasury securities, are backed by the full faith and credit of the United States government, therefore there is no practical default risk so they can be considered extremely safe.
- In comparing to bank/credit union savings accounts and CDs, some members have expressed that they believe them to be equally safe, since FDIC/NCUA provide insurance up to a specific limit also backed by the full faith and credit of the US government. Other members expressed problems with government insured accounts during the S&L crisis.
- Treasury securities guarantee principal and interest. The possibility exists that an FDIC/NCUA account will receive principal but not interest on failed banks/credit unions. Also, there may be delays in recovering the principal, but FDIC is required to minimize these. Keep in mind that the guarantee for principal and interest on T-bills only extends when held to maturity. When selling on the market, you'll get neither guarantee of principal nor interest, so when considering selling the T-bill on the market, it may be said that an FDIC/NCUA account is safer.

Selling before maturity:
-Due to the selling fee, if you think you may have to sell before the bill matures, I recommend you buy it in the largest increments you're comfortable with since the seller fee is per security (in TreasuryDirect), independent of the amount.
-Since the time period is fairly short, you won't make or lose much money if you sell before maturity. These bills are good candidates to plan to keep to maturity, but can be sold if needed.


Some useful links:

TreasuryDirect
Recent Treasury Bill Auction Results
Daily Treasury Yield Curve


FAQs: (partial list to be expanded over time)

1. What's a Treasury bill?
Treasury bills are short-term debt instruments issued by the U.S. Department of the Treasury on a weekly basis to finance the operation of the federal government. They are part of the series of marketable securities issued by the government including "bills" (<1 yr), "notes" (1yr-10 yr), and "bonds" (> 10yr). They are also part of what comprises the "money market" for short-term debt instruments.

2. How do Treasury bills work?
They are a form of zero-coupon bond. This means, you buy the T-bill at a purchase price that's a discount from face value, hold it for a specified period of time, and then receive the face value (purchase price + interest) back. They are sold in multiples of $1000. For instance, you might be buying bills for $975 and receive $1000 after 6 months, where the $25 difference is the "interest" you receive. It is the bill's discounted price that's determined at auction, and which will determine the rate you get. The Treasury will not redeem the bill before maturity, but you can sell it to the secondary market, which consists of buyers interested in buying already issued Treasury securities, usually for a different price than what you originally paid at the auction.

3. What terms are available?
The Treasury currently auctions 28 day, 91 day, and 182 day bills (often referred to 1 month, 3 month, 6 month bills). There are shorter term "cash management bills" which are not available to individual investors.

4. What are the important dates?
- Tentative auction calendar: published quarterly on the first Wednesday of February, May, August, and November.
- Annoucement date: when the announcement for a specific auction is made (a few days before the auction).
- Auction date: when the price and rate of the bills are set (usually Monday for 91 and 182 day, and Tuesday for 28 day bills); one has to request the purchase prior to the auction.
- Issue date: purchase price for the bill is due (usu. Thursdays of the auction week).
- Maturity date: when you'll receive the purchase price plus interest back.
- End of original issue holding period: when you may sell or transfer a bill out of TreasuryDirect (45 days from issue, or the maturity date for 28 day bills).

5. How are T-bills taxed? When is interest considered to be paid?
T-bills are state/local tax free, but the interest is federally taxable as ordinary interest income (1099-INT). Interest for T-bills is considered to be paid at maturity, creating a tax event only at maturity (as opposed to savings accounts and CDs which credit interest in regular intervals, and T-notes and T-bonds which pay interest semiannually). If your bill matures in the next calendar year, you'll only owe tax in that next year. If you sell your bill or modify the registration (ownership) you may create a tax event before maturity.

6. What's a Treasury bill's investment rate? What's the discount rate? How do I compare it to bank deposit accounts?
What's called the "investment rate" is effectively what would be reported as APR for bank accounts. The discount rate, determined by the bank discount method, is an interest rate calculation method used since before everyone had computers and calculators. It makes several assumptions that make it appear lower than APR. It's in standard use for money market instruments and therefore most approporiately compared to other money market instruments such as commercial paper. (not to be confused with MMA accounts) Comparison to bank deposit accounts is most easily facilitated by calculating an APY as discussed next.

7. What do you mean by a Treasury bill's APY?
We calculate APY for two reasons: (1) to compare to bank savings and CD accounts that commonly list their rates in APY, and (2) to show that the return of reinvested T-bills is higher than just their blended APRs. The APY assumes the principal and proceeds are reinvested at the same rate in the future. It follows that the APY will not tell you exactly the return you can expect after a year, since T-bill rates are by definition guaranteed for less than a year. But, neither are the rates of savings accounts and short term CDs! Think about it and let us know if you disagree with the concept ... (for exact calculation see quick summary)

8. OK, so then what is a Treasury bill's tax equivalent APY?
(You may want to skip this question if you're in a state without state/local income tax.) The tax equivalent rate recognizes that the T-bill is state/local tax free, and savings and CD accounts are not. Therefore, you'll have a higher return on a T-bill with the same APY as you'd have with a savings account or CD. It does not mean you actually get a higher return THAN the APY, it means that this is the APY a savings account or CD (or other state/local taxable investment) would have to have, in order to beat the return of the T-bill. The tax equivalent APY depends on three factors: (1) your marginal state and local rate, (2) your federal rate, (3) whether or not you itemize. (for exact calculation see quick summary)

9. How are the purchase price and the investment rate (APR) related?
If you consider the purchase price as the "principal" of the investment and the difference between face value and purchase price the "interest," if you calculate (interest/principal)*(365/days of bill) you get the APR. The Treasury does this calculation for us to 1/1000 basis point, however the price is actually more accurate to 1/1000 of a cent for a $1000 bill.

10. How do I know the rate I'll be getting if I put money into this in advance?
You don't! It's part of the fun and excitement of T-bill investing. Get used to it. T-bills are auctioned and you'll most likely be a non-competitive bidder, which means you're willing to accept whatever rate is determined at the auction. The auction system enables that the rates are determined efficiently by market forces, corresponding to whatever the current economic outlook is. It also makes for a fun game usually every Monday and Tuesday 1 PM ET to be the first to post the auction rates, and there will be rate speculation and forecasts discussed at the end of the week in this thead. Arguably, it's one step closer to the real action than savings and CD rates, which are set by banks according to their deposit needs at the time. (This could be good or bad ... you'll never see a "T-bill special" advertised.) If you MUST know your rate, you could buy an already issued T-bill on the secondary bond market through a broker for the prevailing yield to maturity, although be prepared for fees/spreads on the rate to be involved.

11. Can I bid competitively in the auction?
Competitive bidding means you set the minimum rate you're willing to accept, or your order will not be filled. The typical methods by which an individual would purchase T-bills only allow non-competitive bidding. For competitive bidding, you'd have to bid using the "Commercial Book Entry System" which is limited to institutional investors. If you find a way, let us know!

12. I think I'm ready to invest in T-bills. Where can I buy them?
There are three common methods to purchase T-bills: (1) directly from the Treasury through TreasuryDirect (TD), (2) directly from the Treasury through Legacy TD, or (3) from a broker. Each of them have their unique advantages or disadvantages. TD is a fully online system (for better or worse), and Legacy TD is an online/phone/paper based system. If you're a savings bond investor you may already have a TD account.

13. Are there any fees involved?
There are no fees in TD for T-bills held to maturity, and no account maintenance fees. Similarly, no rates for T-bills held in Legacy TD although an annual fee does apply for > $100k account balance. When buying from a broker, make sure they charge no fees for T-bills bought at auction and pass the full auction rate along to you. Although no recommedation is given, Fidelity has been verified by multiple posters as charging no fees and giving the full rate.

14. Can I *really* sell the bill right away after I buy it?
Yes but no. It depends. T-bills are fundamentally some of the most liquid instruments available in the market. However, if you choose to use TD for buying the bills, a 45-day hold (or 28-day hold) applies during which you cannot sell the bill. (This is for the Treasury to make sure you're good for the money.) The hold does not apply to Legacy TD. Any hold that your broker imposes would be per their own policy.

15. I opened an account with TD, but I'm not able to transfer money or buy T-bills.
Check in the account info tab if you have a T08 hold. If that's the case, you need to send TD a certified account authorization form first. The authorization form can be certified by any FDIC insured financial institution. Note that previously, the hold only applied to transferring money back out of TD. Now, it applies also to money transferred in and purchases of securities. The form is linked in the quick summary.

16. Can I link TD to any checking or savings account for my T-bill purchase?
Ideally yes, but so far we've had one exception reported: Amboy Direct Savings link will not work. If the link does not work because of an R20 code (non transaction account), your purchase will be cancelled. If you don't have sufficient funds, we suspect your purchase will go through and TD will try to pull the money again at a later time. We recommend you transfer a few dollars into a C of I to test out the link, if you don't want to be surprised when you want to buy T-bills. Or buy yourself a $25 EE or I bond through TD.

17. What are cash management bills and how can I buy them?
The shortest term of T-bills (usually between 1-2 week terms) are called "cash management bills." They are auctioned infrequently and in irregular intervals, and their purpose is to give the Treasury some short term cash as the need arises. Their investment rate is usually close to the fed funds rate. Depending on current rate expectations for the future (i.e. if rate increases or rate cuts are expected), these can sometimes produce the highest yields of currently auctioned T-bills (of course only for a short duration). They are not sold through TD or Legacy TD, but only through the commercial book entry system. Individuals can participate through brokers, although Citibank Private Bank is the only confirmed broker who offers cash management bills to its clients. The overall gain from seeking to invest in these rather than other T-bills is quite small.

Member Summary
Most Recent Posts
Hello
Is there a web site that compiles daily prices for specific T-Bills and Notes? I have recently purchased some from ... (more)

Howardish (Jun. 29, 2010 @ 3:50p) |

21-DAY 08-26-2010 09-16-2010 0.170 0.172 99.990083 912795VB4
4-WEEK 08-26-2010 09-23-2010 0.155 0.157 99.987944 912795U90... (more)

goldsheet (Aug. 29, 2010 @ 6:32p) |

BUMP

4-WEEK 10-21-2010 11-18-2010 0.135 0.137 99.989500 912795UJ8
56-DAY 10-21-2010 12-16-2010 0.150 0.152 99.976667 91279... (more)

goldsheet (Oct. 21, 2010 @ 4:22a) |

----------------------------------------------------------------------------------------------------------------
Recent T-bill auction yields:

Term .... Issue date ..... Investment Rate(%) ..... APY(%)
28 day .... 11/27/09 .............. 0.060 ................ 0.060
91 day .... 11/27/09 .............. 0.040................. 0.040
182 day .. 11/27/09 .............. 0.140 ................ 0.140
----------------------------------------------------------------------------------------------------------------
Contact information and phone numbers: Treasury contact info

Links mentioned in topic:
TreasuryDirect
Recent Treasury Bill Auction Results
Upcoming Treasury Marketable Securities Auctions ==> RSS feed
Tentative Auction Schedule of U.S. Treasury Securities
Bureau of Public Debt Mailing Lists
Daily Treasury Yield Curve ==> RSS feed
Federal Reserve Bank Yield Calculation Explanation
Informative Bond Website with nice Yield Curve Graph
CNN/Money Bond Center with Commentary
Tax-equivalent yield convertor if you don't deduct state taxes
Tax-equivalent yield convertor if you deduct state taxes
Previous Thread on Same Topic
Account authorization form
Treasury note thread (2-10 year maturities)
TIPS thread (Treasury Inflation-Protected Securities)
State Income Tax Rate
2008 Federal Tax Tables

Yield comparison tools:

T-bill tax equivalent yield spreadsheet
The new all-in-one spreadsheet to calculate your tax equivalent yield for a specific T-bill, and also
the reverse calculation to find out at what state/local rate a T-bill beats an alternative investment.
Copyright 2006-2008 goldsheet, Engineer, and mariojm

T-bill Tables and Charts
A summary of the auction investment rates and APYs of 28, 91 and 182 day bills,
from January 2006 to present, in table and graphical formats.
Copyright 2007-2008 goldsheet

Yield formulae:

APY = (1+(APR/n))^n - 1
where:
APR ... "Investment yield" for T-bills as a fraction (example 1% = 0.01)
APY ... expressed as a fraction
n = 365/(days of T-bill); example 365/182 for a 182 day bill

Tax equivalent yields: (all rates expressed as fractions)
If you itemize on your federal taxes (deduct state taxes): Equivalent APY = APY/(1-state tax rate)
If you do not itemize on your federal taxes: Equivalent APY = APY*(1-federal tax rate)/(1-federal tax rate-state tax rate)

-----------------------------------------------------------------------------------------------------------
EXAMPLE: Recent tax equivalent yields for CA (9.3% state tax)
(All rates calculated for various marginal federal income tax rates)
-----------------------------------------------------------------------------------------------------------
TERM (days) ..................................... 28 .................... 92 ................... 182
ISSUE DATE ............................ 11/27/09 ............ 11/27/09 ........... 11/27/09
Unadjusted APY.......................... 0.060% ............. 0.040% ............. 0.140%
Itemizers (deduct state tax).......... 0.066% ............. 0.044% ............. 0.154%
Non-Itemizers @ 15%.................. 0.067% ............. 0.045% ............. 0.157%
Non-Itemizers @ 25%.................. 0.069% ............. 0.046% ............. 0.160%
Non-Itemizers @ 28%.................. 0.069% ............. 0.046% ............. 0.161%
Non-Itemizers @ 33%.................. 0.070% ............. 0.046% ............. 0.163%
Non-Itemizers @ 35%.................. 0.070% ............. 0.047% ............. 0.163%
-----------------------------------------------------------------------------------------------------------
Note: Calculations are for the highest California tax bracket. If you are not in the the 9.3%
CA tax bracket or in another state, please use tbillsheet.com for your specific situation.
-----------------------------------------------------------------------------------------------------------
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Very, very good post, with excellent, detailed information.

Green and props for you.

OP. I looked but didn't see if you calculated this rate inclusive of the state level tax exemption or not.

That could range as high as 10% of the interest income, I believe (New York State).

JohnnyRotten said: OP. I looked but didn't see if you calculated this rate inclusive of the state level tax exemption or not.

That could range as high as 10% of the interest income, I believe (New York State).


It does not include higher return you would receive on a state tax exempt investment vs. non-exempt. If you were to include the state tax exemption, your effective return would be even higher. There are formulas available to calculate the difference (I've seen them for instance on the U.S. savings bond threads).

Inverted yield curve. Prepare for recession. Thanks OP.

Edit: I'm thinking of keeping most in my HSBC account for now. I'm guessing that once the Bank of Japan raises rates, we'll see a pop in the auctions. Any thoughts?

Great post, OP - green

robinso123 said: Inverted yield curve. Prepare for recession. Thanks OP.

Edit: I'm thinking of keeping most in my HSBC account for now. I'm guessing that once the Bank of Japan raises rates, we'll see a pop in the auctions. Any thoughts?


I'm also planning to stick with HSBC for now. If T-bills inch close to 5%, and everything else stays the same (or, god forbid, HSBC were to drop April 30), I'll seriously look at T bills as an alternative. I'm not sure if the Bank of Japan would be a decisive factor, there are quite a bit of other factors right now (inflation expectations, economic outlook etc.) that add some volatility. It's almost like you have to time your T-bill purchase just right.

In recent days the yield curve actually flattened quite a bit. The 6 month is still ahead most of the time, but is closely followed by the 2 year and now even 3 and 5 year notes. Although arguably, if you compare APY, the 6 month T-bill wins if you consider it as a reinvestment opportunity. The notes pay semiannual interest payments, therefore don't appreciate, and I would argue their APY is therefore the APR, although you could also argue that the interest payments can be reinvested elsewhere.

Here are some more informative sites:

Federal Reserve Bank Yield Calculation Explanation
Informative Bond Website with nice Yield Curve Graph
CNN/Money Bond Center with Commentary

Thanks for the tip with the lower broker fee, goldsheet! I'm under the impression (but might be wrong) that Fidelity is overall a little pricy as compared to other discount brokers like Scottrade ... does Fidelity charge any inactivity fees like Ameritrade etc.? Any experience with purchasing/selling treasuries (or other bonds) through other brokers? What's the best overall broker for fixed income investments? (They usually advertise their great equity trade fees, which I am absolutely not interested in!)

But yeah, 50 cents definitely beats 45 bucks! Even though, I would probably keep T bills to maturity unless all hell breaks lose. Before I fork over the $45 I'll probably break one of my I bonds if I need the cash. No, wait. Make that EE.

Good links, mariojm, thanks !

If you buy/sell treasuries through a broker, do they typically retain the ownership of the treasury security? I'm not sure if it makes a practical difference, unless maybe your broker goes broke. I did notice that Scottrade, for instance, says "Scottrade acts as principal" (link). They don't list an commission for Treasuries so am I to assume it is free to buy/sell?

I'm planning to sell my EE's too. Even though they are not THAT bad, they are from before when they switched to the fixed rate based on the 10-year yield with some added magic. Still, (I have to do the math and include interest loss) I believe I could get better with HSBC currently than the EE based on 90% of 5-year treasury yield. Heck, I could buy the 5 year and get 100% of it.

EDIT: Apparently, the "acts as principal" has nothing to do with ownership. According to davidaexp1, "principal" means that the broker acts in their own interest when trading your bonds, i.e. they'll try to get a cut from purchasing and selling them by selling to you for a higher price or paying you a lower price when you sell. An agent would mean that they act in your best interest, i.e. pass on the price of the highest bidder to you, but they'll charge a fixed fee for the service. In that sense, when selling using SellDirect in TD, the government acts as an agent for a fixed $45 fee. Whichever one you'll use would depend on the specific situation.

As far as ownership is concerned, JayGatsby and JohnnyRotten have pointed out that there are SEC rules in place which protect your ownership.

can I use ing account to fund or do I have to pull out of ing to regular checking then send to treasurydirect.gov?

AbbaZabba said: can I use ing account to fund or do I have to pull out of ing to regular checking then send to treasurydirect.gov?

Great question. Typically, you can use any account (savings, checking) and it'll be ACH. You can link as many accounts as you want (need to do this at the TreasuryDirect side). However, ING has a specific problem that they apparently don't allow ACH through other institutions. (I.e. if you try to add ING for bank-to-bank transfers from, for instance, HSBC or BoA it doesn't recognize the existence of ING.)

TreasuryDirect does their bank verification different though than the usual trial deposits. They verify in some way that the name and SSN on the account matches yours. (I guess, since they are the government, they can do that.) So, it might just work for ING but no guarantee. Any other bank I know of, it should work. Has anyone had any experience to the contrary?

i tried to set up an account with treasurydirect but they asked me to mail the account authorization form back to them with "acceptable cerifying individuals". A notary public is not acceptable. Who can I ask for signature? Thanks.


mariojm said: AbbaZabba said: can I use ing account to fund or do I have to pull out of ing to regular checking then send to treasurydirect.gov?

Great question. Typically, you can use any account (savings, checking) and it'll be ACH. You can link as many accounts as you want (need to do this at the TreasuryDirect side). However, ING has a specific problem that they apparently don't allow ACH through other institutions. (I.e. if you try to add ING for bank-to-bank transfers from, for instance, HSBC or BoA it doesn't recognize the existence of ING.)

TreasuryDirect does their bank verification different though than the usual trial deposits. They verify in some way that the name and SSN on the account matches yours. (I guess, since they are the government, they can do that.) So, it might just work for ING but no guarantee. Any other bank I know of, it should work. Has anyone had any experience to the contrary?

for those who can meet the $25k min initial deposit, isnt it easier just to open this account that bases its rates on the tbill?

http://www.fatwallet.com/forums/messageview.php?catid=52&threadid=562761&highlight_key=y&keyword1=patelco

One more thing to note if you buy a T-bill through TreasuryDirect ... you'd be specifying your purchase in round numbers of $1000's but the actual amount deducted from your funding account will be less. E.g. for a $1000 bill you'd be paying $976.74 in this most recent auction and after 182 days you get $1000.00 back. The difference is your interest.

Also, anyone trying to get in on the most recent auction, I believe it's too late for that. To my knowledge you have to schedule your purchase before the auction (any experience on how close you can be?). The safest thing to do is probably to review market yields at the end of the week and schedule a purchase over the weekend if it looks promising. Or, you can buy any day on the secondary market through a broker.

didYOUsearch said: for those who can meet the $25k min initial deposit, isnt it easier just to open this account that bases its rates on the tbill?

http://www.fatwallet.com/forums/messageview.php?catid=52&threadid=562761&highlight_key=y&keyword1=patelco


Interesting alternative, but does Patelco have the full faith and credit of the US government? (I know the answer - they are privately insured.) I suppose it is guaranteed that the CD stays indexed to the T-bill or can that change? Also, some people may want to time their T-bill purchases at times of high yield rather than taking an average.

didYOUsearch said: for those who can meet the $25k min initial deposit, isnt it easier just to open this account that bases its rates on the tbill? PatelCo CU
While you might get a little more liquidity from planned withdrawls at PatelCo, aren't you getting fully taxable dividends/interest? That can make a big difference since the T-bill interest is state/local tax free. For example, in the 30% Fed, 9% CA tax brackets, the 4.83% T-bill is equivalent to a 5.54% fully taxable account.

Taxable Equivalent Rate = 4.83% (1-Fed Rate) / (1 - Fed Rate - State Rate)

(with a small correction if you itemize and deduct your state taxes...)

Edit: I don't think I agree with the tax equivalent calculator linked in OP. It gives the same equivalent rate for a state-tax exempt (but federally taxable) bond regardless of the federal tax rate. This is incorrect.

Has anyone successfully linked TreasuryDirect to their EmigrantDirect account? As I am likely to purchase large quantities of securities in this manner I don't want to leave the money sitting in the checking account I have linked to TreasuryDirect.

Also reading about the auctions on TreasuryDirect I saw an interesting note. No one may purchase more than $5 million at any one auction...

xerty said: didYOUsearch said: for those who can meet the $25k min initial deposit, isnt it easier just to open this account that bases its rates on the tbill? PatelCo CU
While you might get a little more liquidity from planned withdrawls at PatelCo, aren't you getting fully taxable dividends/interest? That can make a big difference since the T-bill interest is state/local tax free. For example, in the 30% Fed, 9% CA tax brackets, the 4.83% T-bill is equivalent to a 5.54% fully taxable account.

Taxable Equivalent Rate = 4.83% (1-Fed Rate) / (1 - Fed Rate - State Rate)

(with a small correction if you itemize and deduct your state taxes...)

Edit: I don't think I agree with the tax equivalent calculator linked in OP. It gives the same equivalent rate for a state-tax exempt (but federally taxable) bond regardless of the federal tax rate. This is incorrect.


You can work the state tax saving out by multiplying .09 * .0483 = .004347

Add .004347 to .0483, and you can see that your real APY on a 6 mos T-Bill in California is 5.2647%.

Just a quick note on the 3-month. The 3-month rate of 4.615% corresponds to an APY of just a touch under 4.70% (4.6956% to be precise). The best low-minimum 3-month CD from the CD-thread is 4.65%.

Unfortunately this is below the HSBC savings rate. Your effective rate may be higher though, based on state taxes.

I forgot to mention - The million dollar question is whether treaury yields will rise, stabilize or drop in the ensuing auctions.

Those arguing it will rise got a vote of confidence when european central banks increased their rates.

Rates will rise. Foreign banks starting to raise. US has to raise to prevent money flowing out of US treasuries. Plus, summer is coming. Economy strong. Mortgage rates likely to rise. Will pull treasury curve upward.

davidaexp1 said: Rates will rise. Foreign banks starting to raise. US has to raise to prevent money flowing out of US treasuries. Plus, summer is coming. Economy strong. Mortgage rates likely to rise. Will pull treasury curve upward.Aren't we not supposed to predict interest rates? or just me?

tooshy said: davidaexp1 said: Rates will rise. Foreign banks starting to raise. US has to raise to prevent money flowing out of US treasuries. Plus, summer is coming. Economy strong. Mortgage rates likely to rise. Will pull treasury curve upward.Aren't we not supposed to predict interest rates? or just me?

That was in the past. This time we KNOW we are right, I can just feel it...

walletfart said: tooshy said: davidaexp1 said: Rates will rise. Foreign banks starting to raise. US has to raise to prevent money flowing out of US treasuries. Plus, summer is coming. Economy strong. Mortgage rates likely to rise. Will pull treasury curve upward.Aren't we not supposed to predict interest rates? or just me?

That was in the past. This time we KNOW we are right, I can just feel it...
This is a very informative thread...my apologies to OP, just one comment if the housing bubble slowdown really gains traction, do you see rates continuing upward? However, rates should climb a bit more, I just feel it too....

Should we be concerned about default risk if we buy from a brokerage? That could happen I guess but I don't see it as likely that Fidelity or others would go under in the very near term, but for longer term treasuries, if you plan to hold to maturity, and if need to spread default risk (maybe I'm not using the correct words, ie. don't want all your eggs in one basket), I would buy from TD.

tooshy said: Should we be concerned about default risk if we buy from a brokerage? That could happen I guess but I don't see it as likely that Fidelity or others would go under in the very near term, but for longer term treasuries, if you plan to hold to maturity, and if need to spread default risk (maybe I'm not using the correct words, ie. don't want all your eggs in one basket), I would buy from TD.

Fidelity or TD going under would have no effect on positions in your account. Firm and customer accounts are segregated. The only default risk would be the US Gov't defaulting on the debt -- which I wouldn't worry about too much!

JayGatsby said: tooshy said: Should we be concerned about default risk if we buy from a brokerage? That could happen I guess but I don't see it as likely that Fidelity or others would go under in the very near term, but for longer term treasuries, if you plan to hold to maturity, and if need to spread default risk (maybe I'm not using the correct words, ie. don't want all your eggs in one basket), I would buy from TD.

Fidelity or TD going under would have no effect on positions in your account. Firm and customer accounts are segregated. The only default risk would be the US Gov't defaulting on the debt -- which I wouldn't worry about too much!


Exactly.

Treasury obligations are backed by the full faith and credit of the United States Government.

If that goes broke, you'll have much larger issues to worry about, anyways.

Where did I read that the ownership of the T-bills is your brokerage account? I was not really sure, hence my statement w/a question mark.

tooshy said: Where did I read that the ownership of the T-bills is your brokerage account? I was not really sure, hence my statement w/a question mark.

You're correct. The bills may be issued in your brokerage's name, but they are still owned by you. Rest assured that there are many SEC regulations that prevent your brokerage from trying to claim them as their own.

jfunk138 said:
Has anyone successfully linked TreasuryDirect to their EmigrantDirect account? As I am likely to purchase large quantities of securities in this manner I don't want to leave the money sitting in the checking account I have linked to TreasuryDirect.


Yes I have treasury account and EmigrantDirect linked

Whats so interesting about a 5 million limit?Text

Since the rates are expected to rise, wouldn't it be prudent to wait till next fed meeting and buy T-bills after that?

Thanks for the information in this thread...

Beware the hikes of March

JohnnyRotten said:

Exactly.

Treasury obligations are backed by the full faith and credit of the United States Government.

If that goes broke, you'll have much larger issues to worry about, anyways.

Right, If that happened FDIC would not be able to cover banks anyway.

DreamR2I said: Since the rates are expected to rise, wouldn't it be prudent to wait till next fed meeting and buy T-bills after that?

Thanks for the information in this thread...

Beware the hikes of March


Good thought, but what if everyone expects a rate raise and it doesn't happen? Then rates would fall, if they have been priced into the market previously. I suppose you could follow a laddered approach similar to a CD ladder. Buy a little now, and a little later. Or leave in a high yield savings account for now and follow how the rates develop (that's my plan at this point). I've linked my HSBC account to TD already - so if the 4.8% goes away or becomes unattractive, it's just a click of a button to jump into T-bills.

Great post. Thanks!

I do anticipate 5% by April in HSBC

I'm considering opening the tradeking account with 100$ bonus for 1k. Can you buy these bills through them?

very informative post, green for the cute lil' brown cow!

boids said: very informative post, green for the cute lil' brown cow!

Moooo, Muuuuh!
Thanks for the compliment, boids!
*munches on green grass* yummy!

Green wings for the lil' yellow boid!
Fresh green grass for your feathery lil' taaail!


AbbaZabba said: I'm considering opening the tradeking account with 100$ bonus for 1k. Can you buy these bills through them?

Apparently, you can trade Treasuries with TradeKing:
TradeKing Fixed Income Trading Desk 877-495-KING (5464)
Tradeking Commissions Page showing $24.95 flat fee for Treasuries

However, I doubt they specialize in fixed income and will give you the best deal. They seem much more geared towards option and margin trading. Also, they are fairly new, so perhaps there's some existence risk with them. There'a already enough market risk, why take a risk with your broker, too?

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