Fidelity's Auto-Roll- Be Careful of potential issue

[mmegu]

I'm in the process of having one of my Treasury bonds Auto Roll at Fidelity. There is usually a 3-4 day period where the new bond is bought and it settles on the existing bond's maturity date. This causes a large pending debit in your account during the settlement period and it could potentially be larger than your normal cash balance.

If this happens, Fidelity will reject any direct debit it receives during this period.

This happened to me this week. I had more than enough cash to cover the debit. But, the bond's auto-roll created an accounting debit in the account and my external credit card's automatic direct debit was rejected.

Fidelity's system cannot distinguish an Auto-Roll debit from actually having insufficient funds. It will reject the direct debit withdrawal during those three days between purchase and settlement of the Auto-Roll bond.

I spent a lot of time today discussing this with Fidelity. Their answer is basically they understand it is an issue with the auto-roll process. But, there's nothing they could do about it. They said the only work around it to time the direct debits outside the auto-roll settlement periods.

I have always found Fidelity's technology to be top notch and I have never had issues with them. But, it is quite frustrating that their auto roll feature causes a potential problem for direct debits.

[vaylie]

Yeah that's a serious flaw in their algorithms. It's why I have a separate savings brokerage account from my normal checking (CMA) and investing (VTI/VXUS) just to auto roll my treasuries.

[rbd789]

I split my taxable into two accounts. One holds just the bond ladder, and effectively gets a free margin loan between auction and settlement (I do not have margin enabled on any accounts). The second account holds everything else. I don't mind at all.

[edge]

Yes, this is documented in several threads. Keep roll over bonds separate from operating account.

[MrJedi]

Yep. Use auto roll in separate account. It only takes a few minutes to open another account and transfers within your own Fidelity accounts are instant. It is a little annoying yes but easy to workaround.

[PizzaEater]

I split my taxable into two accounts. One holds just the bond ladder, and effectively gets a free margin loan between auction and settlement (I do not have margin enabled on any accounts). The second account holds everything else. I don't mind at all.

It's not a free margin loan, though. You don't need cash to cover the purchase until the settlement date, and the cash from the maturing bill is available on the settlement date as well.

This is easier to see when using Treasury Direct linked to a checking account. When making a purchase the cash doesn't leave your checking account until the settlement date. Treasury Direct doesn't check on the auction date if you already have sufficient funds sitting in your checking account.

The fact that Fidelity subtracts the purchase from your cash position on the auction date is a bug, not a feature, in my opinion.

[anon_investor]

Yeah that's a serious flaw in their algorithms. It's why I have a separate savings brokerage account from my normal checking (CMA) and investing (VTI/VXUS) just to auto roll my treasuries.

+1.

[rbd789]

I split my taxable into two accounts. One holds just the bond ladder, and effectively gets a free margin loan between auction and settlement (I do not have margin enabled on any accounts). The second account holds everything else. I don't mind at all.

It's not a free margin loan, though. You don't need cash to cover the purchase until the settlement date, and the cash from the maturing bill is available on the settlement date as well.

This is easier to see when using Treasury Direct linked to a checking account. When making a purchase the cash doesn't leave your checking account until the settlement date. Treasury Direct doesn't check on the auction date if you already have sufficient funds sitting in your checking account.

The fact that Fidelity subtracts the purchase from your cash position on the auction date is a bug, not a feature, in my opinion.

Yes, you're right. My mistake in starting that it was. Thank you for the correction.

[AnnetteLouisan]

Oh that explains a recent rejection I had. That’s enough for me to cancel autoroll. It makes us look like poor credit risks or worse. I also was confused seeing a large pending debit and thought it was fraudulent. Thanks for the heads up on this!

[LookinAround]

Oh that explains a recent rejection I had. That’s enough for me to cancel autoroll. It makes us look like poor credit risks or worse. I also was confused seeing a large pending debit and thought it was fraudulent. Thanks for the heads up on this!

<snip>
I spent a lot of time today discussing this with Fidelity. Their answer is basically they understand it is an issue with the auto-roll process. But, there's nothing they could do about it. They said the only work around it to time the direct debits outside the auto-roll settlement periods.

I have always found Fidelity's technology to be top notch and I have never had issues with them. But, it is quite frustrating that their auto roll feature causes a potential problem for direct debits.

Yours is a common complaint. I don't know why they "can't do anything about it".

fyi... Another useful resource for Fidelity, is their subReddit r/fidelityinvestment. Fidelity Associates typically answer questions quickly within the business day. Many people have already complained about the same issue with their AutoRoll service. Note that threads that include a response from Fidelity Associates are tagged Official Response

Auto Roll and Available Balance

[Rager1]

For those who use the Fidelity Auto Roll service, be aware that the auto roll feature doesn't work every time.

Earlier this year, I had an auto roll that didn't work. I called them but they couldn't explain what happened. Today, I had a second failure with the auto roll feature. Fortunately, when I didn't see an open order on Tuesday for today's T Bill auction, I placed an order to make sure I didn't miss the T Bill.

I spoke to Fidelity again today and they advised me that there is a glitch in their system with the auto roll feature and they are working on a solution. They were not able to give me a resolution date on the glitch.

Ed

[CuriousGeorgeTx]

Because of this potential issue, I have a separate account that only contains TBills on autoroll. (My nickname for the account is "DYI Money Fund").

The autorolls have executed flawlessly for the ~ 6 months I have had it set up.

But something strange happened a little while ago. I noticed while researching another matter in the Documents section a document with the name "Payment Not Received". The account number is for the DYI Money Fund account and the amount was the amount needed to purchase the new TBill less the small MMF balance in the account from the realized purchase discounts from prior bills.

From the letter:
"This is an important notification regarding your account which needs your immediate action. Your account with Fidelity
Investments has a balance for certain trades in the amount of $4,900.40 that was due on or before 02/11/2025, settlement
date, but still has not been received as of today. If payment is not received by 3:00pm Eastern time on 02/18/2025, we
regret that securities in your account may be liquidated at that time or as soon as feasible thereafter.

According to our records at National Financial Services LLC (NFS), this balance due is a result of trades executed on
02/06/2025. NFS provides trade execution, clearing and other related services on behalf of Fidelity Investments."

Nothing happened, so I guess everything worked as expected. But I wasn't happy to receive such a scary notice. I'm glad I didn't see it until after the time had passed.

I had to call Fidelity over another issue, so I raised this one with the rep I spoke to. He did a little poking around and said that, as many have noted, their system can't see that a TBill is maturing, but usually figures it out before the notice is generated. But sometimes it doesn't and the unnecessary notice gets generated. Not ideal, but I'm not going to stop autrolling over it.

[nanotom]

I got the same notice on the same day, and never before. My suspicion is the actual Treasury payout was delayed, what with all the DOGE nonsense.

[snic]

I split my taxable into two accounts. One holds just the bond ladder, and effectively gets a free margin loan between auction and settlement (I do not have margin enabled on any accounts). The second account holds everything else. I don't mind at all.

It's not a free margin loan, though. You don't need cash to cover the purchase until the settlement date, and the cash from the maturing bill is available on the settlement date as well.

This is easier to see when using Treasury Direct linked to a checking account. When making a purchase the cash doesn't leave your checking account until the settlement date. Treasury Direct doesn't check on the auction date if you already have sufficient funds sitting in your checking account.

The fact that Fidelity subtracts the purchase from your cash position on the auction date is a bug, not a feature, in my opinion.

It is a really dumb way for them to do it. Instead, they could just prevent you from selling the maturing T-bill. If you try to do so, a message would pop up saying "if you want to sell this security, you must cancel auto-roll first." That way, there will always be funds to cover the auto-roll and they won't have to encumber any other funds in your settlement account.

And the stupid "there are not enough funds to cover the trade you made, please add funds immediately to prevent us from liquidating your securities to cover your purchase" messages, which are basically nothing but scary and unnecessary lies, just scream "amateur hour" and I really expect better from Fidelity.

[FactualFran]

Different Fidelity clients have had different experiences with autoroll. I starting using autoroll a few years ago and have not had any problems with it.

I have a cash management account for spending and short-term savings and a separate account for long-term investing. The cash management account has a ladder of Treasury Bills on autoroll, with about the same par amount in each rung. As needed, I transfer cash from the long-term investing account so that the balance in the settlement fund of the cash management account is at least the highest par amount of a rung of the Treasury Bill ladder plus the expected spending for a month.

I don't have unexpected spending that needs to be immediately paid from the cash management account. I don't try to have only a minimal balance in the settlement fund of the cash management account.

[brockmari]

I'm considering moving all of my T-bills to Fidelity (currently at TD) but this is one of the issues I had been concerned about. My set up is that I have a CMA account that holds a money market fund (typically not the core fund) to cover expenses for the next few months and a brokerage account that also holds the same money market fund that I transfer to the CMA when it needs to be replenished. What I am considering is to convert most of the brokerage account to rolling T-bills with just enough remaining in the non-core money market for the next CMA replenishment. My question is, if during an auto-roll, my brokerage account balance were to go negative for a couple of days, and all of the remaining money in the account is in a non-core money market fund, would I be able to transfer shares from that money market fund to the CMA or would that transaction be blocked until the auto-roll T-bill transactions are settled?

[legolast]

I'm considering moving all of my T-bills to Fidelity (currently at TD) but this is one of the issues I had been concerned about. My set up is that I have a CMA account that holds a money market fund (typically not the core fund) to cover expenses for the next few months and a brokerage account that also holds the same money market fund that I transfer to the CMA when it needs to be replenished. What I am considering is to convert most of the brokerage account to rolling T-bills with just enough remaining in the non-core money market for the next CMA replenishment. My question is, if during an auto-roll, my brokerage account balance were to go negative for a couple of days, and all of the remaining money in the account is in a non-core money market fund, would I be able to transfer shares from that money market fund to the CMA or would that transaction be blocked until the auto-roll T-bill transactions are settled?

No, what you want to do will likely cause problems.

Let's say you buy one 4-week T-Bill every week for 4 weeks and set all of them to auto roll. After 4 weeks, those 4 T-Bills will be setup and rolling every week. So every Wednesday morning, an order will be placed automatically for the next T-Bill. And then around noon every Thursday, the order will be filled at auction and a pending debit of around $997 will show in your positions. The following Tuesday, a previous 4-week T-Bill will mature to cover the debit but everything won't be settled until very late Tuesday or Wednesday morning when you'll have about $3 of interest available and then it starts all over again.

You won't be able to transfer out of that account up to the debit amount between Thursday at noon when the order is filled at auction until the following Wednesday morning.

I had 12 T-Bills auto rolling (four 4-week T-Bills and eight 8-week T-Bills) which meant around $2K tied up most of the week. I had a separate account setup just for the T-Bills but once I accidentally transferred $1500 to that account and I had to wait until the following Wednesday to transfer it to where I wanted it.

It's possible I could have called in to get the $1500 moved, but it wasn't a big deal since I had enough to cover what I needed, so I didn't pursue that.

Also, every Wednesday morning, I made a point of transferring the about $10 of interest earned out of the account.

It all wasn't worth bothering with so I'm currently in the process of unwinding those auto rolls.

[brockmari]

I had 12 T-Bills auto rolling (four 4-week T-Bills and eight 8-week T-Bills) which meant around $2K tied up most of the week. I had a separate account setup just for the T-Bills but once I accidentally transferred $1500 to that account and I had to wait until the following Wednesday to transfer it to where I wanted it.

It's possible I could have called in to get the $1500 moved, but it wasn't a big deal since I had enough to cover what I needed, so I didn't pursue that.

Also, every Wednesday morning, I made a point of transferring the about $10 of interest earned out of the account.

It all wasn't worth bothering with so I'm currently in the process of unwinding those auto rolls.

This is very helpful. I had thought that worst case I could just open a third Fidelity account to hold my rolling T-bills, but your illustration shows that will not be a suitable workaround. I was also going to transition some of my longer term money market funds into weekly rolling 4 week T-bills, so I'll now revert to plan B and use TD for all of my T-bills. Then TD can send the reinvestment interest over to my brokerage account, and as I want to spend a T-bill I will simply cancel the TD reinvestment and the proceeds will go right to my brokerage account instead of having to transfer it out of a 3rd Fidelity account during a short window of time. Appreciate the insight!

[runr]

so if I have a T-bill auto roll set up and during that 3-4 day period, if i make a deposit in that account can I make a buy order with the whole deposit?

[daleddm]

I went thru a similar confused example with them recently - with about a dozen t-bills at various auto-roll dates, there is the accumulation of proceeds in the settlement fund (not CMA). I tried pulling the amount from the settlement - denied - system said no funds unavailable ... I called and rep explained it (amount in settlement) was encumbered in the purchase of the next auto-roll, and wouldn't be available until the order processed - meaning until the original bill had paid out, and new auto-roll bill order funded (now by the old) within their system.

Curiously, the settlement fund amount was nowhere near enough to fund the auto-roll new bill - but "off-limits" nonetheless. Pretty convoluted

[brockmari]

so if I have a T-bill auto roll set up and during that 3-4 day period, if i make a deposit in that account can I make a buy order with the whole deposit?

I haven't tried this, but perhaps if someone with a set of rolling T-bills in a Fidelity account wanted to add more while avoiding the encumbrance of frozen proceeds, they could make the initial T-bill purchase in a separate account and then before the first auto-roll transfer it to the account holding the ladders. At any rate, this discussion has convinced me that I don't want to hold my rolling T-bills at Fidelity and will use TD for that. If I were buying longer term treasuries I would still consider Fidelity because it would be easier in case I wanted to sell before they matured.

[dcdowden]

I ran into this situation once, but I only use auto-roll of treasuries in our IRA's where our holdings are generally very stable. I can see where that could be a real issue if you were trying to withdraw funds to pay bills or something.

[123]

I had been thinking of automating our estimated tax payments (Federal EFTPS and State) and using one of our Fidelity accounts to fund them. However we also have some automatic treasury rollovers in those Fidelity accounts as well. There is a chance that an in-process treasury rollover could interfere with having funds available for an estimated tax payment. I'm now thinking I should use a HYSA account we have elsewhere to fund the automated estimated tax payments