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.
Top Comments
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!
Join The Conversation
Share your experience with the Slickdeals community
Share information with the community. Please follow our Community Guidelines and be kind!
782 Comments
Sign up for a Slickdeals account to remove this ad.
08/14/2023 11/16/2023 3 months, 6 days from today
If you are unsure the difference between those, you should learn them. They are all very different. This thread is referring to Bills. Bills are securities issued with a maturity less than 1 year.
https://www.ecfr.gov/current/titl...Part%20356 [ecfr.gov] here's the calculations for each type, provided by the treasury. T-bills are VI.
And please don't assume I didn't know the difference between T-Bills and others.
08/14/2023 11/16/2023 3 months, 6 days from today
08/14/2023 11/16/2023 3 months, 6 days from today
The next auction for the 26-week is 8/14 and will be issued on 8/17.
https://www.treasurydir
In other news I feel like T-bill rate increases have slowed to a crawl for now.
Ally bank CD says interest is paid out daily and compounded on CD, so wouldn't that be better than the treasury (am not sure if treasury bonds are compounded)?
comparison -> I have locked in no penalty 4.75% for 9 months vs 5.4% t-bill?
Question about the long term, if we get the long term notes like 10 years, does it have option to sweep earnings every year or you have to wait until end of the term?
From the Treasury Direct website "We sell Treasury Notes for a term of 2, 3, 5, 7, or 10 years.
Notes pay a fixed rate of interest every six months until they mature."
Sign up for a Slickdeals account to remove this ad.
From the Treasury Direct website "We sell Treasury Notes for a term of 2, 3, 5, 7, or 10 years.
Notes pay a fixed rate of interest every six months until they mature."
Ally bank CD says interest is paid out daily and compounded on CD, so wouldn't that be better than the treasury (am not sure if treasury bonds are compounded)?
comparison -> I have locked in no penalty 4.75% for 9 months vs 5.4% t-bill?
T-bills don't get compounded. It gets paid out at the end of maturity or every 6 months, whichever is shorter.
If I buy at auction, I am the 1st owner of the bill/note/bond. I should be getting 100% of the interest paid by the bill/note/bond. TD had my money and supposedly bought my Treasury at auction. TD Ameritrade CSRs agreed with all this. However, on the IRS Consolidated 1099, TD Ameritrade reported accrued Treasury interest paid (some term like that). Accrued interest only happens when someone sells an interest bearing instrument between interest payments. So it implied that a 3rd party sold me the Treasury bill/note/bond, and I paid them accrued interest (and thus didn't pocket the whole Treasury interest reported to me). Ie it implied I didn't buy the Treasury at auction. But I placed a buy order for a Treasury at auction on the TD Ameritrade site, not on the secondary market, and TD Ameritrade agrees that I did make a purchase at auction. So why was I shorted accrued interest? This was buried deep in the little details of the 1099 small print, so easy to miss. Not sure how I saw it, but TD Ameritrade could not explain why I had accrued interest payments for a Treasury purchased at auction. I can only think some shenanigans happened. Anyway, long story but now I buy from Treasury Direct and won't have that funny middleman business to deal with.
Principal withdrawn from my bank account: $1,946.51.
Interest-rate for 26-week TB issued on 6/1/23: 5.526%
At mature: $2000 will be deposited into my bank account (no reinvestment)
Calculation: $1,946.51 + $1,946.51*0.05525*182/366=$1,999.99818=$2,000
So obviously this doesn't confirm your professional understanding.
https://i.imgur.com/O0i2Ug0.png
https://i.imgur.com/wenOMN5.png
Discount rate at issue was 5.25%
2000 * 5.25%(182/360) = $53.08
T-bills don't get compounded. It gets paid out at the end of maturity or every 6 months, whichever is shorter.
Sign up for a Slickdeals account to remove this ad.
https://i.imgur.com/O0i2Ug0.png
https://i.imgur.com/wenOMN5.png
Discount rate at issue was 5.25%
2000 * 5.25%(182/360) = $53.08
Join The Conversation
Share your experience with the Slickdeals community
Share information with the community. Please follow our Community Guidelines and be kind!