Why is this is better than an ETF treasury fund, CDs, and high-interest savings accounts?
Answer: Treasury Bills "interest" is state & local tax-free on the money earned. So if you're in a high-income tax state and city they're worth it.ETF fund aren't always 100% in treasuries and charge fees.
Question (asked a dozen or more times in the thread) : How does bill interest work?
Answer: Treasury Bills "interest" is the difference between face value and purchase price. You buy a $10k bill at less than $10k, upon maturity, it is worth $10k. The difference between purchase price and maturity value is your "interest."
Tax Equivalent Yield Calculator For Savings Bonds, Treasury Bills, and Tax-Exempt Money Market Funds
https://www.mymoneyblog
How Buy and Sell Treasury Bills
https://thefinancebuff.com/treasury-bills-cd-money-market.html
When are the auctions? When can I place an order?
4, 8, 13, 17, and 26 week bills are auctioned every week.
52 week bills are auctioned every four weeks.
You can see recent results and the planned schedule at: https://www.treasurydir
4 and 8 week bills are usually announced on Tuesday, auctioned on Thursday, and settle on Tuesday.
17 and week bills are usually announced on Tuesday, auctioned on Wednesday, and settle on Tuesday.
13 and 26 week bills are usually announced on Thursday, auctioned on Monday, and settle on Thursday.
52 week bills are usually announced every 4th Thursday, auctioned on Tuesday, and settle on Thursday.
At a brokerage, you can usually can place an order between the announcement and auction.
At TreasuryDirect, you can place an order up to about 8 weeks in advance.
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Treasury BILLS are currently paying over 5% for various maturity lengths under 1 year. These can be bought through most brokerages even without a TreasuryDirect account.
Treasury BONDS are paying 4% or less and have 20 or 30 year terms.
The 4 week bill ordering opens tomorrow 8/8, the deadline to buy it is sometime Thursday 8/10 morning depending on where you are buying it and it settles on 8/15.
On TD Ameritrade, they take your money on the 10th (take it out of the money you can trade with when you hit purchase which can be as early as the 8th) and buy the bill on the 15th during time which you earn no interest. Thus the reason that I stopped buying 4 and 8 week bills at auction. Secondary markets settle the next day so often a better deal. Treasury direct does not take the money from your bank account till the day it settles and Vanguard keeps it in the settlement fund earning interest till the day it settles as well. Not sure about the other brokerage houses. Also, not sure if you rollover the t-bills how the time between redemption and the next auction works as far as any interest you are losing as that is often a week of interest as well.
FYI, if you do the math, 4 weeks for $10,000 usually gets you about $40 in interest for letting them hold your money for 5 weeks.
The Monday auctions for 3 months and six months settle on Thursday so much less time to hold your money for nothing and less redemption downtime.
The money market funds often have repurchase agreements that are taxed at the state and local level but obviously more liquid. Am looking into the ETFs now.
Good luck to everyone!
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Auto rolling may or may not be offered by your brokerage. Two of my brokerages, TD Ameritrade and ETrade, don't offer it.
Auto rolling may or may not be offered by your brokerage. Two of my brokerages, TD Ameritrade and ETrade, don't offer it.
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At auction, everyone gets the same price. However, at a brokerage, you have to place the order between the announcement date and the auction date, with brokerages usually closing orders a few hours before. It then takes a number of days for the auction to settle (1 to 4 business days for the regular weekly auctions), at which time the funds are due.
On the secondary market you're buying or selling from other participants. It's usually pretty liquid for Bills, but like stocks and ETFs there's a bid-ask spread, so there's a built in cost. Unlike an auction, you know what yield you're going to get when you buy them.
You can also usually sell bills on the secondary market, though there may be a (usually small) capital gain or loss. The brokerage should calculate what portion of the difference in purchase/sale price is interest and capital gain/loss on the 1099.
T-bills are T-Bills. if you buy them, you have 100% guarantee of the returns promised as it's a promise of the government, unless the US defaults.
FZDXX is a Prime Money Market fund. At Fidelity, it requires a $100K minimum initial purchase, though you can drop below that after the initial purchase.
SPRXX is a different share class of the same fund with a higher expense ratio, and lower yield, but not minimum purchase amount.
If you are not familiar with the risks of Prime Money Market funds, you may prefer to Government Money market funds which are stricter on what they can hold, or FDIC insured savings accounts.
At a brokerage, you can sell on the secondary market. You may get better or worse prices on Bills depending on the brokerages.
The opposite would happen if rates drop, with past performance showing a higher return than the current yield of its holdings.
I am usually satisfied with the prices available at Fidelity and Vanguard, though Schwab tends to offer better pricing on small orders.
There have been some liquidity issues in the secondary market over the past several weeks, so there can be higher minimums transaction amounts on some bills at Fidelity and Vanguard or worse pricing.
Note that you can modify the number of reinvestments. So, after the first reinvestment, you could increase it again to 2 years, or stop future reinvestments.
Not 1 year.
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edit: answered
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