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!
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Thanks and in a State w/o bank interest tax
Shahhere
Shahhere
(100 / 97.338250) ^ (366 / 7/ 26) - 1
(100 / 97.338250) ^ (365 / 7/ 26) - 1
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If your Schwab account has margin, then you won't lose 1 week's worth of use of that money elsewhere (e.g. in Schwab's US Treasury Money fund). You just have to be sure to liquidate the funds by/on settlement date. Your account balance will show negative until then, but they won't actually charge you margin interest. That's how I do it.
Schwab's cash management is definitely geared towards making Schwab money vs the customer. They got rid of sweep feature, so you have to manually move money in/out of funds (1 day settlement) or else they'll earn next-to-nothing interest sitting as cash balance.
Fidelity is much better for the customer in that regard...cash goes to your choice of fund earning decent interest, and they'll auto-liquidate from any of Fidelity's higher-interest money funds as well. But their money funds don't pay as much as Schwab, especially if you qualify for Schwab's Ultra funds.
Price = 1000 (1 – (.00145 x 182)/360) = $999.27
Example explanation
1000 is the contract value of the Bill (i.e... $1,000)
.00145 = Annual interest rate (in this example 1.45%)
182 is duration of BIll (in this example 26 weeks (182/7))
360 is total number of days in the year (Treasury uses 360)
So, the $999.27 is what you would pay for the $1,000 Bill when purchased
At maturity, you would receive $1,000.
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