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So I started to ladder T-Bills for the reasons everyone is stating in this thread. The rate is so volatile (in a good way) that locking into anything even 12 months is too long for me and rates continue to climb. I use fidelity and my suggestion is this.
When they offer the new 4 week and 8 week and 13 week t-bill (they auction on diff days and diff weeks) go in and buy one of each of them with whatever money you can spare. Let's use 5k for each.
I would buy a 4 week t-bill with NO Rollover for 5k
I would buy an 8 week t-bill with NO Rollover for 5k
I would buy a 13 week t-bill WITH Rollover for 5k
Then after 4 weeks when that first on comes up, buy another 13 week t-bill with the 5k WITH Rollover.
Then after 8 weeks when the second comes up, buy another 13 week t-bill with the 5k WITH Rollover.
Now you will have 3 13 week t-bills rolling every 4 weeks or so and rolling into a new one with the proceeds. This way every 4 weeks you are capturing an increasing rate and not locked into anything longer than 13 weeks. You benefit from the rate hikes, can cash out at any time, and you have state tax shelter from the earned interest.
I can almost guarantee that the above will yield you more net income (taking in tax break) at the end of 11months then the 5% locked CD
just my 2cents
You can buy treasuries from just about any brokerage. I use Fidelity, as I like their platform and they don't charge fees/commissions for treasuries. Fidelity Fixed Income Page[fidelity.com]
Follow the above link and scroll down to the row "U.S. Treasury." Choose the duration you want and click on it. You can then click "buy" to start a trade of a specific treasury bill/bond. Fidelity's Intro to Treasuries[fidelity.com]
This is true, but it doesn't make an 11-month CD at 5% a bad idea. Those HYS can change their rates at any time, but here you're guaranteed to get 5%.
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I'll just give my usual plug about how treasuries aren't taxed by state and local taxes, which might make them a better investment for you. Additionally, they're more liquid than CDs.
At 5%, you'd need to have a ~10% local/state income tax for treasuries to be better for you. This 5% rate is a pretty good deal.
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02-02-2023 at 11:15 AM.
Quote
from plflorence
:
Can you give some examples how we can find these treasuries? Thanks!
You can buy treasuries from just about any brokerage. I use Fidelity, as I like their platform and they don't charge fees/commissions for treasuries. Fidelity Fixed Income Page[fidelity.com]
Follow the above link and scroll down to the row "U.S. Treasury." Choose the duration you want and click on it. You can then click "buy" to start a trade of a specific treasury bill/bond. Fidelity's Intro to Treasuries[fidelity.com]
Our community has rated this post as helpful. If you agree, why not thank TurtlePerson2
02-02-2023 at 11:20 AM.
Quote
from BabyDoll415
:
Examples of treasuries with minimal downside?
Sure. 3 month treasuries are yielding 4.65% right now. If interest rates jumped 1% overnight (absolutely crazy, has never happened), then your treasury would be worth about 0.3% less on the secondary market. If you had held it for at least a couple of weeks, then you'd be about even. Generally speaking, any treasury with a term of 12 months or less has little chance of ever dropping below what you paid for it, and even then only within the first few weeks of holding it.
This is true, but it doesn't make an 11-month CD at 5% a bad idea. Those HYS can change their rates at any time, but here you're guaranteed to get 5%.
I don't forsee honestly sub 5% for the year. CDs don't give you upward protection. I would say at best it's a wash but I do have 5% apy CD at NFCU so nothing against CDs here. Just saying you may get better rates on next CD too
Sure, at mom and pop's no name house of banking. Also, what do you think will happen the second the Fed lowers rates?? Mom and pop will do the same. This CD locks you into 5% for 11 months.
You can buy treasuries from just about any brokerage. I use Fidelity, as I like their platform and they don't charge fees/commissions for treasuries. Fidelity Fixed Income Page[fidelity.com]
Follow the above link and scroll down to the row "U.S. Treasury." Choose the duration you want and click on it. You can then click "buy" to start a trade of a specific treasury bill/bond. Fidelity's Intro to Treasuries[fidelity.com]
The government can default on these? And is set to do so if congress doesn't pass any legislation increasing the debt ceiling?
I don't forsee honestly sub 5% for the year. CDs don't give you upward protection. I would say at best it's a wash but I do have 5% apy CD at NFCU so nothing against CDs here. Just saying you may get better rates on next CD too
5.25 NFCU here. A bird in the hand is worth two in the bush.
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When they offer the new 4 week and 8 week and 13 week t-bill (they auction on diff days and diff weeks) go in and buy one of each of them with whatever money you can spare. Let's use 5k for each.
I would buy a 4 week t-bill with NO Rollover for 5k
I would buy an 8 week t-bill with NO Rollover for 5k
I would buy a 13 week t-bill WITH Rollover for 5k
Then after 4 weeks when that first on comes up, buy another 13 week t-bill with the 5k WITH Rollover.
Then after 8 weeks when the second comes up, buy another 13 week t-bill with the 5k WITH Rollover.
Now you will have 3 13 week t-bills rolling every 4 weeks or so and rolling into a new one with the proceeds. This way every 4 weeks you are capturing an increasing rate and not locked into anything longer than 13 weeks. You benefit from the rate hikes, can cash out at any time, and you have state tax shelter from the earned interest.
I can almost guarantee that the above will yield you more net income (taking in tax break) at the end of 11months then the 5% locked CD
just my 2cents
Fidelity Fixed Income Page [fidelity.com]
Follow the above link and scroll down to the row "U.S. Treasury." Choose the duration you want and click on it. You can then click "buy" to start a trade of a specific treasury bill/bond.
Fidelity's Intro to Treasuries [fidelity.com]
Sign up for a Slickdeals account to remove this ad.
At 5%, you'd need to have a ~10% local/state income tax for treasuries to be better for you. This 5% rate is a pretty good deal.
Our community has rated this post as helpful. If you agree, why not thank TurtlePerson2
Fidelity Fixed Income Page [fidelity.com]
Follow the above link and scroll down to the row "U.S. Treasury." Choose the duration you want and click on it. You can then click "buy" to start a trade of a specific treasury bill/bond.
Fidelity's Intro to Treasuries [fidelity.com]
Our community has rated this post as helpful. If you agree, why not thank TurtlePerson2
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Plus secured with FDIC
Search "t-bills" on google and youtube
Sure, at mom and pop's no name house of banking. Also, what do you think will happen the second the Fed lowers rates?? Mom and pop will do the same. This CD locks you into 5% for 11 months.
Doubtful. Fed only hiked 25bp yesterday.
Fidelity Fixed Income Page [fidelity.com]
Follow the above link and scroll down to the row "U.S. Treasury." Choose the duration you want and click on it. You can then click "buy" to start a trade of a specific treasury bill/bond.
Fidelity's Intro to Treasuries [fidelity.com]
Sign up for a Slickdeals account to remove this ad.
5.25 NFCU here. A bird in the hand is worth two in the bush.