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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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.
does that mean i need to wait till 8/14 to buy it?
does that mean i need to wait till 8/14 to buy it?
So a MMF 4.5% APY is a direct comparison to a Yield of 5.45%(or whatever) Treasury bill, regardless of if the MMF compounds daily or monthly, or if the treasury doesn't compound at all. The net money you'd earn after a year is 4.5% vs 5.45%. If the MMF compounds daily with an APY of 4.5%, its 'interest rate' will be lower, like 4.1% or so, to earn an APY of 4.45%
This is my understanding, at any rate. if you compare APYs, you don't need to know how they achieved that APY, it's apples to apples.
Investment rate is meant to be comparable to Treasury Bonds and Notes, which pay out every six months.
The actual formula is in this PDF document from TreasuryDirect:
https://www.treasurydir
For the 4-week bill auctioned today: (912797GS0)
High rate: 5.280%
Investment rate: 5.390%
Price Per $100: 99.589333
Price is based on high rate.
Price: 99.589833 = 100 * (1 - 28 * 0.05280 / 360)
Investment rate: 5.390% = ((100 - 99.589333) / 99.58333) * (366 / 28)
APY: 5.53% = (100 / 99.589333) ^ (366 / 28) - 1 (Or 5.51% assuming a 365-day year)
This post on the Bogleheads forum [bogleheads.org] explains in more detail. The Investment rate calculation uses 366 days when we're less than a year from a February 29 leap day.
Thank you for your explanation and link to the accrued interest page. Reps!! Still not 100% sure what I'm supposed to do during tax time with this, but at least it explains why I got it. Too bad TD Ameritrade didn't know to tell me this. Even tho TD Ameritrade got bought by Schwab, Schwab is still (currently) keeping TD Ameritrade branding and operations separate. At least all my TD Ameritrade dealings still look unchanged.
I usually just buy Bills in taxable accounts to avoid this issue completely.
We apologize for the inconvenience and ask that you try again later.
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You can see recent results and the planned schedule at: https://www.treasurydir
At some brokerages you can buy Bills whenever the bond market is open, but you may receive a better or worse price than at auction.
1. You don't sell a T-bill on TreasuryDirect. You hold it to maturity. If you feel like you need more flexibility, then do 4 week T-bills with auto reinvest.
2. Any mutual fund or ETF, whether it is invested in Treasuries or whatever, will be subject to market volatility. You can lose your original capital. Barring the collapse of the federal government government, you can't lose capital on T Bills bought through Treasury Direct.
T-Bonds and T-Notes have coupon payments every six months. In general those payments taxed as income and reported on Box 3 of the 1099-INT.
If. T-Bond or T-Note is sold at a discount to Par value, I think the discount would probably be reported on a 1099-OID over the remaining length of the term. IRS Publication 1212 discusses how to properly report this on your Federal return and what to do if you bought it at a premium to face value.
I don't want to deal with this, so I don't buy Bonds or Notes in my taxable account.
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