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One-Year Treasury Constant Maturity T bill 4.14

1,020 1,187 September 25, 2022 at 04:59 PM in Finance (4)
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Last Edited by BeAuMaN | Staff September 25, 2022 at 10:22 PM
+63 Deal Score
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I don't know that much about this. Sharing here to get some feedback. It seems it is highr than CD

Treasury Bills
Treasury bills, or T-bills, are sold in terms ranging from a few days to 52 weeks. Bills are typically sold at a discount from the par amount (par amount is also called face value); rarely, they have sold at a price equal to the par amount.

When a bill matures, you are paid its par amount. If the par amount is greater than the purchase price, the difference is your interest.

You can buy bills from us in TreasuryDirect. You can also buy them through a bank or broker. (We no longer sell bills in Legacy Treasury Direct, which we are phasing out.)

You can hold a bill until it matures or sell it before it matures.

Learn more in "Treasury Bills in Depth"
Buy T-Bills in TreasuryDirect
Use Treasury bills to:

Diversify your investment portfolio
Participate in a secure, short-term investment
More about Treasury bills in the Research Center
at a glance
Original Issue Rate: The discount rate determined at auction.

See rates in recent auctions
Minimum Purchase: $100
Maximum Purchase
(in a single auction): Noncompetitive - $10 million
Competitive - 35% of offering amount
(See types of bidding in "Auctions in Depth")
Investment Increment: Multiples of $100
Issue Method: Electronic

Rates & Terms
Treasury bills are issued for terms of 4, 8, 13, 26, and 52 weeks. Another type of Treasury bill, the cash management bill, is issued in variable terms.
4-week, 8-week, 13-week, 26-week, and 52-week bills are auctioned on a regular schedule.
Cash management bills aren't auctioned on a regular schedule.
More about Treasury Bills rates and terms in the Research Center
Redemption Information
Minimum Term of Ownership: In TreasuryDirect, 45 days
Interest-Earning Period: To maturity
More about Treasury Bills redemption in the Research Center
Tax Considerations
Interest income is exempt from state and local income taxes.
Interest income is subject to federal income tax.
More about Treasury Bills tax considerations in the Research Center



https://www.treasurydirect.gov/in...glance.htm

https://home.treasury.gov/resourc...nth=202209
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#2
Can someone translate this to layman terms?
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#3
I know nothing about this so don't take my word for it. But I did some very light link diving and what I see is the last 52 week return rate being this: last 52-Week Investment Rate: 3.603%. that what I see. Not sure if this is better than just sitting in an IRA or Money Market account.
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#4
If you are looking to stash ~10k, then I-bonds (also available at treasury direct) is a better bet - 9.62% annualized for the next 6 months (and good chance of a similar high rate for the next 6 months). This can scale beyond 10k depending on the size of the family.
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#5
Look at www.savingsbonds.gov. (It is for all U.S. Government debt…not just savings bonds) All necessary info as well as upcoming and historical auction info can be seen by clicking on the tiles in the lower left. Most people here are probably focusing on 1 of 3 types of treasury securities….1) Bills (1 year or less to maturity) 2) Notes (2-10 years) or 3) Bonds (>10 years). Click on the correct category under the Auction Results tile.

As of this writing, treasuries maturing about 6 months and beyond are yielding in the 4% range. And interest is free from state/local taxes.

There is no good reason to purchase bonds thru the treasurydirect website. And there is a major disadvantage. You can purchase all treasuries thru brokerage firms such as Schwab and Fidelity. There are no fees whatsoever to purchase treasuries thru them. And you can purchase treasuries in the secondary market (those that were previously sold in an auction) as well as brokered bank CD's which have finally caught up to treasury rates @ intermediate maturities. And by holding your positions at the brokerage firm you retain the ability to sell them at any point whereas positions purchased in a treasurydirect account can only be held to maturity or transferred to a brokerage firm.
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Last edited by MAKNYC September 25, 2022 at 10:02 PM.
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#6
Quote from TheScofflaw :
If you are looking to stash ~10k, then I-bonds (also available at treasury direct) is a better bet - 9.62% annualized for the next 6 months (and good chance of a similar high rate for the next 6 months). This can scale beyond 10k depending on the size of the family.
Also note, however, that your money is locked up until 1 year. And then if at any point before 5 years you choose to withdraw, you will surrender the last three months of interest. So, for example, if you surrender in 12 months, your total return would be ~7.22%. Still an excellent return for something so safe, but not exactly the advertised 9.6%. It's doubtful that rates will remain this high over 5 years, either... At least I really hope not because the rates directly track inflation so if they stay this high...
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09-25-2022 at 10:02 PM
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#8
Quote from BeepBopBeep :
Can someone translate this to layman terms?
Here ya go

https://thefinancebuff.com/treasu...arket.html
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09-25-2022 at 10:38 PM
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#10
Keep in mind that buying a T Bill, today, or near term, would be buying a bill in a market where the Fed is clearly set on increasing interest rates AT LEAST in 2 more cycles. Next rate increase should be 75 basis point or 0.75%.

Now, that expected increase may be priced into the current offering (ie, the discount off par) - Fed Funds Rate is currently 3.25% and current online yield info shows a one year T Bill yielding 4.15% (1 bps higher than OP's post). So, a 1 yr Bill is trading at 90 bps over Fed Funds Rate. That's high… but, again, rates are almost guaranteed to increase another 75 bps at the next Fed meeting, which is Nov 1/2. The next Fed meeting after that, is Dec 13/14. Soooo, if you lock in for a year at 4.14%, and the Fed increases rates 75 bps in Nov and another 50-75 bps in Dec, then in just 3 months Fed Funds Rate could be as much as 4.75% before 2022 is even over.

If the Fed Funds Rate is 4.75%, then even a small spread on the T Bill yield vs Fed Rate could be 25 bps *if* the market believes big Fed Rate Increases are over and inflation stabilizes (possibly due to a recession)… meaning a T Bill could yield 5% +, easily, as early as late Dec 2022, this year. So, again, just food for thought… 4.14 or 4.15% is a good rate for right now, but this is only on a 1 yr Bill, and depending on the economy and inflation, who knows how high rates could go by Sept 2023 when a 1 yr T Bill bought today would finally mature. By then, even $1 par Money Market Bank Accounts could be paying 5% +.

So, all of the above is not to say that if you have a lot of spare change that you should NOT park it in a T Bill… it's just to say, maybe consider taking a lower yield on a shorter term Bill (vs a 1 yr) and then looking at buying in sometime in late Dec 2022 or early 1st quarter 2023. It just doesn't seem to me that a 4.14% return is great in market conditions where inflation is 8% + a month, and the Fed has all but telegraphed future rate increases that will likely be 100 bps (1%) or more.

My 2 pennies….
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Last edited by GimmeYoTots September 25, 2022 at 11:01 PM.
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#12
I see 6-month CDs at 3.938 and 9-month at 4.020 thru Schwab, doesn't that make more sense?
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09-25-2022 at 11:24 PM
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#14
Quote from Fanime :
I see 6-month CDs at 3.938 and 9-month at 4.020 thru Schwab, doesn't that make more sense?
CDs are taxed at state and federal level. Treasury instruments are only taxed at fed
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#15
Current CD rates available through Schwab CD OneSource
See below for a selection of today's rates

Current CD rates available through Schwab CD OneSource
Maturity Ranges Rates up to
1-3 Month CDs 3.44% APY
4-6 Month CDs 3.94% APY
7-9 Month CDs 4.02% APY
10-18 Month CDs 4.10% APY
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