t-bills are cool due to their tax advantages, but shouldn't you be comparing it to 6-month CDs in the CD thread?? you're still locking in for 6 months, selling fees would most likely negate any potential benefits esp since it would be at market value.

bh2006 said:t-bills are cool due to their tax advantages, but shouldn't you be comparing it to 6-month CDs in the CD thread?? you're still locking in for 6 months, selling fees would most likely negate any potential benefits esp since it would be at market value.

Well, it has some flavors of liquid accounts and some of CDs so I decided to start a separate thread. I don't think it would have fit either in the highest APR or the highest CD rates thread. How much selling fees would affect it depends on how you sell it eventually. Let's say you use TD's SellDirect with $45 fee. If this is for a $1000 bill, it would likely eradicate all your gains. If it's a $100k bill, it would be ~3 days of interest. And you're right it depends on the market rate. It looks like rates will go further up so you might expect the value to drop. But the most recent trend is for the yield curve to flatten; bill have been rising more slowly and the 10 year note has made up most all of the difference. Depends on fed actions too, of course, and international rates. I don't think we can forecast at this point what market yields would be in 6 months, not even if they are higher or lower. To summarize, it's a different animal than other fixed income investments. But, I think that's good. If you have some liquid savings, some CDs, some bills, you can still retain a good level of liquidity overall.

mariojm said:statom said:Never bought T-bills before so this is just a clarification how it works.

Looks like there is an auction on treasurydirect.com. Looks like one will be held this Monday. It says all bids must be entered by noon est. If you go on the website at 9am, can you see the auction happening and find out what the rates are? What time does the auction usually start?

Or do we just hafta enter a bid prior to noon est and hope the rates are what this thread is talking about?

There are two different ways of bidding in the auction, competitively (specifying a rate but perhaps not getting any bills at that rate) and non-competitively (accepting the rate). They are single rate auctions, so everyone gets the same rate based on the rate that will sell all the bills that are up for auction. In TreasuryDirect you can only bid non-competitively. The details of this can be read at the TreasuryDirect website.

Further, there are two ways of buying, either in the primary market (from weekly auction, through TD or from broker) or in the secondary market (previously issued bills, from broker). The yield you'd be getting should be very much the same in both cases, since otherwise inefficiencies would exist in the market that someone would take advantage of until the rates are equal. Indeed, the auction rates have been tracking the current market rates closely.

As far as the cutoff time is concerned, I'm not sure. But if you're entering the request too late, TD would queue it for next week's auction. To get a good idea of the rates, look at market rates just prior to the auction date. It should be within a few basis points of that.

I guess my main question is can we see what the actual rate is before we buy the T-bill or do we just have to enter the non-competitive bid on the treasury direct website and hope for the best?

statom said:Never bought T-bills before so this is just a clarification how it works.

Looks like there is an auction on treasurydirect.com. Looks like one will be held this Monday. It says all bids must be entered by noon est. If you go on the website at 9am, can you see the auction happening and find out what the rates are? What time does the auction usually start?

Or do we just hafta enter a bid prior to noon est and hope the rates are what this thread is talking about?andI guess my main question is can we see what the actual rate is before we buy the T-bill or do we just have to enter the non-competitive bid on the treasury direct website and hope for the best?For a detailed discussion of all the nuts and bolts, see this post at Diehards.

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statom said:Where can we see this market rate?

Many major financial websites have a bond section that includes T-bill yields. I find this one pretty neat. For historical rates go to the website of the Daily Treasury Yield Curve.

jw530 said:Anyone consider a mutual fund consisting of Tbills exclusively such as Vanguard's Treasury MM account? I used to do the Treasury Direct thing, but got lazy and just let Vanguard do all the work for me. The expense ratios are very low .1-.3% and there is checkwriting and instant liquidity - no 6 month lock up. The yield right now is closer to the 13 wk bills. If the fed raises by another few quarter points, then the 6 mo T's will be locked in at lower rates. Plus you can instantly move money into other things like brokerage and mutual funds. Schawb, Fidelity also offer these funds as well. I think of it as a high yield checking account. With state (CA) tax free earnings, since they are 100% USTs this thing is getting about 4.5% - as good as some bank CDs that require a term lock up. The problem with CDs and even treasury direct is you lose float when you want to take the money out when you have to wait for a check or ACH to arrive.

Is the Treasury MM account like a mutual fund? While investing in a mutual fund is certainly more convenient, bond mutual funds are a whole different animal from the securities that they invest in. Part of what the mutual fund does is buy and sell the bonds rather than hold them to maturity, so there is some market risk that the value of the mutual fund will actually go down if yields go up.

You're willing to forgo 0.3% of return (that's about 7% of your total ROI) to avoid one day interest loss due to ACH transfer?

I appreciate mentioning the option to use a fund rather than investing directly, though. I'm sure a lot of people don't have the time to manage regular T-bill purchases or don't want to learn all the details. However, when using an intermediary you'll almost always give up some of your return. An exception might be the economies of scale that exist, i.e. SellDirect will charge you $45 to sell a security, but when they are held in a fund, every investor only contributes a fraction to the selling fees.

Finally, I also found a reliable source for the cutoff time when bids/tenders have to be placed in order to participate in a given auction. T-bill auction announcements for 2006 can be found here. It includes the auction date, and at the bottom, the time when bids have to be placed. There's a bunch of other interesting information in the announcement, such as how many billions are up for auction and at what rate they replace maturing securities. After the auction, the detailed results are also posted there.

kmith said:mariojm said:Finally, I also found a reliable source for the cutoff time when bids/tenders have to be placed in order to participate in a given auction.
Thank you. This is great for getting the exact NEXT date.
Where can I get the exact rates that resulted from RECENTLY PAST auctions?
An easy-to-read list would be nice.
Second link in the Quick Summary.