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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Discount rate. An annualized rate of return based on the par value of
the bill. The discount rate is calculated on the actual number of days to
maturity by using a 360-day basis (figuring 12 months with 30 days each).
You can't use the discount rate to compare the rate of return on a bill with
other instruments.
Investment rate (equivalent coupon yield). An annualized rate based
on the bill's purchase price. The investment rate is based on the purchase
price and calculated on a 365-day basis (or 366-day basis during leap
year). You can use the investment rate to compare bill yields with other
instruments.
And secondly if I want to close/sell it before 52 weeks - is there a penalty on the interest earned? much like CDs?
There is no interest penalty to sell. you get the interest up to the date you sell it. However the price you sell it at fluctuates just like common stock.
13-Week Maturity: 5.451%
26-Week Maturity: 5.499%
52-Week Maturity: 5.351%
Does this mean if I put in 10,000, then 13 weeks later it will be worth 10,545? Then I can just sell it? So why would someone hold up their money for 52 weeks with a lower rate?
13-Week Maturity: 5.451%
26-Week Maturity: 5.499%
52-Week Maturity: 5.351%
Does this mean if I put in 10,000, then 13 weeks later it will be worth 10,545? Then I can just sell it? So why would someone hold up their money for 52 weeks with a lower rate?
Asked and answered several times in this thread.
You're confusing annual interest rate apy.
With bills you buy it for less than 10,000 and upon it maturity is worth 10,000. The difference is your "interest."
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DON'T USE BACK BUTTON.
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