3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

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aj76er
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3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by aj76er »

At the beginning of the year, I rolled my Ally no penalty CDs to the new 1.75% rate. It appears that now the 3month Tbill is yielding 1.66% (based on Fidelity info).

My state income tax is ~9%, which means the effective yield on a 3month Tbill is (1.66/0.91 =) 1.82%. That is, I'd have to earn 1.82% in a CD to match the Tbill (after taxes).

Qustions:
1. Has anyone converted Ally no-penalty (or other online savings, etc..) to Tbills for this reason?
2. If holding Tbills in a taxable account, how friendly is the taxes on this? I'd be doing this in my Fidelity brokerage. Is the OID difficult to handle come tax-time? (I've never held treasuries directly before)
3. Do you see any downsides here? I suppose rates could move down over the next 10 months, which could make the CDs come out ahead. But I see this as a low probability. I think the more probable case is that rates continue to rise and the Tbills will auto-roll to pick up the new higher rates
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle
livesoft
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by livesoft »

When buying T-bills, your financial institution maay hide mark-up charge. I am not sure if you have to pay it coming and going, but if you purchase a small amount, the fixed fee will be a higher percentage than if you purchase a smaller amount. So that has to be figured in your return.

I bought a T-bill earlier this week. It is my first one ever.
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jacoavlu
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by jacoavlu »

you can buy T bills easily and directly from Treasury Direct. No fees or markups. That's where I buy mine personally, and also for our corporation.
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aj76er
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by aj76er »

jacoavlu wrote: Thu Feb 22, 2018 12:32 pm you can buy T bills easily and directly from Treasury Direct. No fees or markups. That's where I buy mine personally, and also for our corporation.
Can you auto-roll Tbills at Treasury Direct?
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle
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jacoavlu
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by jacoavlu »

aj76er wrote: Thu Feb 22, 2018 12:40 pm
jacoavlu wrote: Thu Feb 22, 2018 12:32 pm you can buy T bills easily and directly from Treasury Direct. No fees or markups. That's where I buy mine personally, and also for our corporation.
Can you auto-roll Tbills at Treasury Direct?
yes
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by livesoft »

I'm looking at web sites online. Here is what I think I found:

Cost to buy a T-bill
$00.00 Schwab
$00.00 Vanguard
$10.00 Fidelity
$19.99 TDAmeritrade
$50.00 WellsTrade

Cost to sell may be different than above.

Would anybody like to confirm or contradict any of the above please?
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livesoft
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by livesoft »

Yes, please show. I will get screen captures of TDAmeritrade, Fidelity, and Vanguard then for comparison. If you want to use a CUSIP: 912796LX5
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jacoavlu
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by jacoavlu »

It looks like you can purchase T bills at Vanguard directly through auction, or through the secondary market.

At Vanguard it looks like t bills are sold in $1000 increments. At Treasury Direct, $100.
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by welderwannabe »

Fidelity is $0 for both primary and secondary Treasuries.

U.S. Treasury: Auctions and secondary issues online $0
I am not an investment professional, but I did stay at a Holiday Inn Express last night.
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by jacoavlu »

I consider myself moderately computer savvy but can't find the ability to purchase new issue T bills at Schwab... for treasure auctions I only see 0 coupon
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by mega317 »

acanthurus wrote: Thu Feb 22, 2018 2:09 pm
jacoavlu wrote: Thu Feb 22, 2018 1:50 pm It looks like you can purchase T bills at Vanguard directly through auction, or through the secondary market.

At Vanguard it looks like t bills are sold in $1000 increments. At Treasury Direct, $100.
Can you confirm that's not a price quote?
Yes I have bought a $100 Tbill. This from the treasury direct site:
Bills are sold in increments of $100. The minimum purchase is $100.
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jacoavlu
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by jacoavlu »

acanthurus wrote: Thu Feb 22, 2018 2:09 pm
jacoavlu wrote: Thu Feb 22, 2018 1:50 pm It looks like you can purchase T bills at Vanguard directly through auction, or through the secondary market.

At Vanguard it looks like t bills are sold in $1000 increments. At Treasury Direct, $100.
Can you confirm that's not a price quote? Schwab quotes prices on a $100 basis but the purchases are in 1k increments (face value of bill I guess). So at Schwab you would buy a single bill at a quoted price of 99.348 buy submitting an order for one $1,000 face value bill and pay 993.48.
It looks to me like's $1,000 increments at Vanguard, $1,000 minimum.
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jacoavlu
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by jacoavlu »

acanthurus wrote: Thu Feb 22, 2018 3:07 pm
jacoavlu wrote: Thu Feb 22, 2018 2:22 pm I consider myself moderately computer savvy but can't find the ability to purchase new issue T bills at Schwab... for treasure auctions I only see 0 coupon
On the top menu bar click "Research" and then the section heading "Bonds and Fixed Income". It should bring up a table. In the table select the duration and the type of bond (e.g. 3 month and treasuries). It should bring up any bills and notes maturing in that time frame.

If this doesn't work click the chat help :) They are pretty good.
that brings up bills offered in the secondary market; I'm talking about new issue T bills, equivalent to what you purchase at Treasury Direct.
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jacoavlu
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by jacoavlu »

^^^ you may be correct.

I tried chat, they weren't any help. Advised I call the "Fixed Income Team".
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by jacoavlu »

again, though, it looks like it's a $1,000 minimum and $1,000 increments at Schwab, like Vanguard
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by stlutz »

Thanks, good to know! I wonder if Treasury Direct is the only place to offer that.
Yes, the actual bonds are only sold in $1000 increments. Treasury Direct apparently will sell you a fraction of a bond.

Here is the treasury auction schedule:

https://www.treasury.gov/resource-cente ... ctions.pdf
I consider myself moderately computer savvy but can't find the ability to purchase new issue T bills at Schwab... for treasure auctions I only see 0 coupon
You won't see the auction listed at your broker prior to the announcement date. So, tonight Fidelity is showing next Monday's 13 and 26 week auctions and next Tuesday's 52 week auction. The 4 week auction on Tuesday won't be announced until Monday.

T-bills are all 0 coupon. They are sold at a slight discount and the you get your interest when the bill matures. There are no separate interest payments. So, the listed coupon will always be zero.

A handy place to actually look at current yields is: https://www.treasury.gov/resource-cente ... data=yield
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livesoft
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by livesoft »

My comparison was tainted because I didn't do everything at the same time, so I will have to do it again.

But i will say it appears that to buy, the prices I saw were
Vanguard < Scwhab (your PM) < Fidelity << TDAmeritrade

That is, Vanguard was $1 less for a buy of $100,000 than Schwab, $10 < Fidelity and $23 less than TDAmeritrade.

The comparison should be made again to confirm and perhaps for amounts of $50K, $100K, $250K.
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carguyny
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by carguyny »

You can't evaluate based on a single point in time quote as often it is someone just looking to sell in sub institutional quantities.

Beet bet is to to with one of them with $0 fee and buy at auction and hold to maturity. Bid ask spread doesn't matter then.

Sometimes I see great secdonary prices and will buy or sell, but it is rare.
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Re: 3 Month T-Bill Replacement for Ally No-Penalty 1yr CDs?

Post by Captain_Video »

When I bought T-Bills through Treasury Direct, the Treasury would debit my bank account on the auction date for the full $1000 face value of the bills purchased. On the issue date, the Treasury would refund the discount amount to my bank account. At maturity the bills were redeemed for the $1000 face value. So essentially the refunded discount was the interest being paid up front. No other interest payments were made. Tax reporting was simple; a 1099 reporting the interest was issued.
I haven't bought bills through a broker but I assume it would work the same way.
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