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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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Hmm I actually see that there are some T-Bill Notes currently listed that seem to be weekly ie. maturity date is 2/28 for yield rate of 4.812 ect.
What does the "Zero Coupon" mean or may be different from "Note"?
Zero coupon means that you buy the security at a discount to face value. You don't get the interest paid at regular intervals. So if you are buying a one year security with face value of $1000, you would pay $950 (depending on the interest rate) when you buy it and at maturity a year from now you will get paid $1000.
Does anyone know what the differences are between these two T-Bill types which I see listed on Fidelity platform?
US TREASURY BILLS ZERO COUPON
US TREASURY NOTE
Coupon is a fancy word for the interest payment on the bond. Treasury bills are always sold below face value, so while you earn ZERO interest, your underlying bond gains value (hence the yield). The treasury also sells some longer dated treasuries which function the same way (no interest payments, but a promise to return more than was borrowed at a later date).
From Investopedia:
"Bonds typically mature in 20-30 years and offer investors the highest interest payments to maturity. T-notes mature anywhere between two and 10 years, with bi-annual interest payments, while T-bills have the shortest maturity terms—from four weeks to a year."
Note that right now, for some strange reasons, treasury bills are actually yielding more than bonds and notes.
Coupon is a fancy word for the interest payment on the bond. Treasury bills are always sold below face value, so while you earn ZERO interest, your underlying bond gains value (hence the yield). The treasury also sells some longer dated treasuries which function the same way (no interest payments, but a promise to return more than was borrowed at a later date).
From Investopedia:
"Bonds typically mature in 20-30 years and offer investors the highest interest payments to maturity. T-notes mature anywhere between two and 10 years, with bi-annual interest payments, while T-bills have the shortest maturity terms—from four weeks to a year."
Note that right now, for some strange reasons, treasury bills are actually yielding more than bonds and notes.
This is known as yield curve inversion. When short term interest rates are higher than long term rates it is considered by some as a sign that recession is coming.
Asking for investment advice from random strangers on the internet is not a good idea. If someone is serious about managing their money they should do their homework and read up on some fundamentals of investing.
Hmm I actually see that there are some T-Bill Notes currently listed that seem to be weekly ie. maturity date is 2/28 for yield rate of 4.812 ect.
Those are most likely T-bills on the secondary market if the maturity is 2/28.
The shortest duration is 4 weeks.
I bought a 4-week T-bill in late January that will be maturing on 2/28.
Fidelity lists the T-bills as Zero Coupon. Schwab doesn't.
So it's essentially the same- it just Fidelity listed as T-Bill Zero Coupon vs may be listed as Note in Schwab.
However there are weekly T-Bill Zero Coupons and Notes available in Fidelity and that is just confusing.
It makes sense as someone has already mentioned that Zero Coupon is secondary market for T-Bills. Do you need to sell the Zero Coupon on maturity date like how you buy/sell stocks to get back your fund (+interest)?
Not sure I know one but I use fidelity. Go to fixed income. New issues and treasury. You have to know the auction schedule for the different t bills. Google t bill schedule and you will see what days to expect to see 4 8 and 13 week t bills have new issues. Then use your broker to purchase them on those days. Remember in t bills there is no coupon.... simply the rate. Also you pay a discount for the t bill. Each is 1000. But you will pay like 980 and when it matures it is worth 1000. Hope that helps
You clearly haven't been following along. They will continue quarter point hikes, or possibly no hikes at some point, but they aren't going to drop it for at least a year. Inflation could also likely rip back upwards, putting larger hikes on the table again.
Or, the Fed could overshoot with interest rates and we drop into a recession. Why not spread your bets - put some in a CD, other funds in Treasuries. Not an all or nothing proposition.
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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]
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What does the "Zero Coupon" mean or may be different from "Note"?
What does the "Zero Coupon" mean or may be different from "Note"?
What does the "Zero Coupon" mean or may be different from "Note"?
US TREASURY BILLS ZERO COUPON
US TREASURY NOTE
From Investopedia:
"Bonds typically mature in 20-30 years and offer investors the highest interest payments to maturity. T-notes mature anywhere between two and 10 years, with bi-annual interest payments, while T-bills have the shortest maturity terms—from four weeks to a year."
Note that right now, for some strange reasons, treasury bills are actually yielding more than bonds and notes.
From Investopedia:
"Bonds typically mature in 20-30 years and offer investors the highest interest payments to maturity. T-notes mature anywhere between two and 10 years, with bi-annual interest payments, while T-bills have the shortest maturity terms—from four weeks to a year."
Note that right now, for some strange reasons, treasury bills are actually yielding more than bonds and notes.
Asking for investment advice from random strangers on the internet is not a good idea. If someone is serious about managing their money they should do their homework and read up on some fundamentals of investing.
The shortest duration is 4 weeks.
I bought a 4-week T-bill in late January that will be maturing on 2/28.
i think I'll wait for Dicover card 500$ sign up bonus with 50k promotion.
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However there are weekly T-Bill Zero Coupons and Notes available in Fidelity and that is just confusing.
It makes sense as someone has already mentioned that Zero Coupon is secondary market for T-Bills. Do you need to sell the Zero Coupon on maturity date like how you buy/sell stocks to get back your fund (+interest)?
https://fixedincome.fid
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