hiddendragon999 said:T-notes have greater liquidity than bank CD's. Notes can be sold on the debt markets without penalty. This liquidity can give you capital gains/losses depending on the market rate vs. purchase rate minus $45 per bond commission.

Thanks for the clarification. So I guess the "penalty" for selling them early is only $45/bond plus/minus some fluctuation of the market rate vs the purchase rate. That does sound liquid enough.

2-YEAR NOTE 08-31-2006 08-31-2008 4.875 4.921 99.913392 912828FR6

4.921% auction yield

Yield has dropped 17 bps from last month's auction, but is noticably up from recent market yields. Yields had been as low as 4.86% last week, so this is about 6 bps improvement in recent days.

You've made a fair argument/point, AlwaysWrite, and I don't consider it cynical or negative at all. In fact, it's what the yield curve is based on ... assumptions about the future based on all available information. Arguably, there's a lot to be learned for making good investment decisions, by reviewing such things as the yield curve. Someone skilled in reading it could see when people expect a recession or rate cuts to occur, and place their bets in the stock market accordingly. One element that makes markets inefficient is the human element, and it seems like these days worries, speculation, etc. generally cause a lot of volatility in the stock and bond markets. Most people probably don't spend as much time as we do reviewing bond analyses, and bond fund managers who do this for a job may be constrained otherwise not to shift their investment strategy dramatically, so I think it's quite possible we do have a little edge.

Having said all that, I don't count on us having an edge. As I always said, I have "beliefs" and "speculation" as to where the economy is going. For instance, I don't think inflation is well contained. Do I have any proof? No. What's priced into the market is that inflation is contained (from recent CPI numbers, other economic reports, etc) but this philosophy might shift if next time core CPI comes in at 0.4%, just as it shifted when we suddenly saw unexpected quick slowndown and lower inflation numbers the last 2 months and caused note yields to drop 0.4%-0.5%. But herein lies "proof" that what's priced into the market is not necessarily "right" or "true," it's just the best available information. In fact, it's not even that. It's the combination of many individual beliefs where the economy is going. For instance, half of the people might think rates will go up, the other half rates will go down; in aggregate, the yield curve might be "flat" but it doesn't mean people expect rates to stay the same.

Speculation with T-notes doesn't seem to me all that bad. I look at these as CDs with upside potential. You have to be sure you like the yield you're getting when you purchase the note (very much like a CD, although you can't "break" your T-note and get the principal back before maturity). Should the yield curve shift upward ... hold on to the note till maturity and be happy with your yield. Should the yield curve shift downward ... you may consider selling early and cash in on the appreciation.

The regular closing times for the 9-Year 11-Month Note Auction on Tuesday,
09/12/06 are:

12:00 Noon Eastern Daylight Saving Time for Noncompetitive Tenders
1:00 PM Eastern Daylight Saving Time for Competitive Tenders


This message is an automated mailing from the Bureau of the Public Debt on the following mailing list:

Government Securities Mailing Lists:
Auction Announcement Press Releases

Isn't this a better thread for discussing government agency debt securities, rather than the TBill thread? (a modest proposal)

mariojm said:ThursdaysChild said:Isn't this a better thread for discussing government agency debt securities, rather than the TBill thread? (a modest proposal)
(snip)

The more I think about this, the more I conclude that Agency bonds really do deserve their own thread. So many good points about them have already been made in the T-bill thread, that they should be captured somewhere in a targeted discussion.

(snip)

I believe that ThursdaysChild's and mariojm's points are worth some additional consideration.

For just a few moments, let's examine this current thread title -

" . . . : strategies for 2 to 10 year government debt investments"

And thinking about the several discussions of "agency" investments in the

"Treasury Bills: Rate Tracking, Discussion, and FAQs (4.83%, 5.03%, 5.18% APY)" thread. Would any of those FW contributions re: agency invenstments be Off Topic in this "2 - 10 yr." thread?

When comparing the 2-10 yr portion of the federal investment market available to consumer folks, and not withstanding my comments made in the Tbill thread on Sep/20/2006 10:38 PM, there are several commonalities between the Treasuries and the Agency investments.

- both are usually considered AAA rated paper

- a few of the common agency bonds offer the same potential state income tax benefits as Treasurys

- given the "maturities" involved, many of both treasury and agency bonds will be traded (acquired by FW readers) in the secondary market

- the secondary market for bonds including US Government issues, has in my opinion, really 'opened up' to small investors with the advent of lower-cost on-line brokers

- Resources used for research and acquisition of the 2 year and beyond federal bonds is for the most part, common

- Both types of these federal investments have some unique characteristics which could well be identified in the current '2 to 10 yr' thread, offering some real educational value to FW members new to this investment arena

- Based on the responses on the TBill thread, there is significant depth of experience and knowledge available, and willingly shared re: the agency issues

- The auction method of acquisition for Treasury bonds has a counterpart with direct agency offerings at par . . .


Except the first two words of the current title of this thread - "Treasury Notes", the rest of the thread title covers the combination of both Treasuries and Agencies. I realize that the current '2 to 10 yr' thread might have had an original intent of Treasuries acquired by auction, but for the purpose of this discussion, it may not need to be that 'narrow' a scope. There is a secondary market for most of the federal paper, and this includes both Treasuries and Agency bonds accessible to small individual investors. Is there a significant 'burden' if the this current thread would be broadened to include both methods of acquisition? And both types of government debt investments?

Yes, if "broadening" the current thread to include the Agencies, one might just take another small step and change to '10 yr' to beyond. As in, "2 yrs and beyond". And, with a small adjustment, perhaps '1 yr and beyond'.

Given the affinity between the Treasury and Agency issues, and has already been seen in the TBill thread, it is natural to compare the returns for both types of investment. I believe a single topic thread covering both types of investments would offer substantial benefit to the FW financial thread participants.

mariojm said, "The more I think about this, the more I conclude that Agency bonds really do deserve their own thread. So many good points about them have already been made in the T-bill thread, that they should be captured somewhere in a targeted discussion."

Again, for the sake of discussion, I believe we do have such a place for this "targeted discussion".

Given the many similarities between Treasury and Agency, and being able to discuss the nuances among both in -> ONE <- topic thread, the gathering the input for both types of investments might enhance the collective 'readership' and participation over time.

Yes, the title of the thread could make it clear for the 'not so into federal investments' types - for example,

Investment strategies for 1 yr and beyond US government Treasury and Agency debt

And thinking of the multiplicity of search engines out there, one might modify the opening to read "Investment strategies and resources for . . . " to help folks find the thread.

'nuff.

All of the above is meant to be a stimulant for thoughts and discussion.

And Thanks to mariojm and ThursdaysChild for getting us to this point.

For me, just because mariojm contributed to the Finance Topic in FW by creating the current thread does not equate to a personal responsiblity to be 'all things to all people' who use this thread, much less, an "expert" on the topic. The FW community (as in us) continues to have our collective responsibility for positive input if we wish the thread to prosper.

Because the Agency issues are similar to the treasury bills/notes, I suggest that we keep the current two threads. Short-term (< 1 year) discussion in the t-bills thread; longer term in this thread. If a new thread is started on Agency issues, people will ask all the time in that thread "how does it compare to the 6-month bill?" or "how does it compare to the 5-year note coming up next month?". When I consider investing in these bonds, maturity is the 1st question I think about. Do I want to roll over short-term bonds or lock in for a bit longer? The slight difference in credit quality is a non-issue. The means of acquisition (broker vs TD) is secondary as well.

I agree with tb00957's suggestion.

In his response to tb00957's suggestion, mariojm said,

"However, ultimately we have to be sure to be able to cater to all crowds, the more advanced folks (who look at Treasury, Agency, corporate, ...) and the newer folks (who are familiar with savings accounts and CDs, and new to bonds). I don't think we can accommodate another FAQ or more rate history data in the T-bill thread for Agency, it would clutter too much. That may be ok, but if we start getting many repeated questions on "what's Agency" "which Agencies are available" "which broker do I purchase from" "what about the fees" etc. then we'll know it's time for a separate thread explaining the details in an organized fashion. Thanks for your input!"

. . .

Perhaps we have a mind-set thing going here. I don't see why any of the 1 yr+ federal paper issues, including Treasuries, Agency, GSE's need to be thought of as part of the less than 1 yr TBill APY thread, nor its FAQ. Mariojm created this "longer term" thread and although it is related to the TBill APY thread, to my thinking, it is independent of it. It is not a sub-set of the TBill APY thread. Yes, of course, there are common elements.

It seems to me that over time, we - with FW contributors, can create a FAQ for this "federal 1+ yr" thread which would deal with the very issues mariojm raised above. Those are valid questions which the FW financial topic audience could be expected to be interested in. And some tips and excellent contributions have already been made on the topic, albeit, not in this thread.

I suggest there is no need for a FAQ for this thread which requires any regular rate/yield reporting, nor any other regular 'necessity' which turns the FAQ and thread into a high maintenance one. Yields for the long federal issues can be captured from readily available sources which the FAQ could well identify, just as mariojm has done so well from time to time in the TBill APY thread. Soliciting 'Tips' and 'experiences' from this thread's readers over time might well offer 'new to the longer term federal investments' FW readers both an education, and some specific money saving tips for investing. Entering into the world of federal long term issues is not easy, and in the not so far past, was the almost exclusive realm of paid brokers, with very comfortable commissions and minimum transaction limits to make it worth their while. However, now small investors without mega accounts can participate in this investment sector with more ease, and less cost. I guess we have to Thank Mr. Gore for his invention of the internet . . .

Not to be trite, but we all begin our investing experiences 'at the beginning', and this thread could well be that into beginning for many FW members.

Mariojm is the OP here, and I am certainly not trying to intrude on the OP's ability to keep the thread evolving in the manner of the OP's choice.

Maybe I'm just "missing" the subtleties, but I am not seeing any big "problems" with this thread's FAQ dealing with the limited world of 1+ yr federal paper investments, with many hooks into the fine work in the FAQ and Wiki of the TBills APY thread.

Of course, if mariojm prefers a fresh start with a new OP on a new thread, then so be it.

1ofushere said:Given the shape of the Treasuries Yield curve now as can be seen here on Vanguard, there might not be a whole lot of FW financial types interested in this Announcement of 2 and 5 yr T-Notes auction.My computer will not download Micromedia Flash, so I cannot see the charts. Is there a simple chart or other example of the yield curve so I can see why the Notes might not be worthwhile?

Today's Treasury auction of 2 yr notes - 4.660 % - Treasury yield

Details here

Tomorrow, auction of the 5 yr notes.