T-Bills My Brokerage v Treasury Direct or Other

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LCX2000

T-Bills My Brokerage v Treasury Direct or Other

Post by LCX2000 »

I have been buying T-bill through my brokerage. I have been researching here at BH but haven't found my answer. (101 stuff here, so my apologies.)

I am trying to ascertain how much I am paying to buy them through my brokerage v directly through TD (where I buy iBonds.)

As an example: On Monday, auction day, 05/06/2024 the Discount rate for the 26 week t-bill was: 5.16 with the coupon rate: 5.37

If I had bought at my brokerage that day I would get a rate a bit below the 5.37.

I am trying to understand if I buy at Treasury Direct (or with other brokerages) would I get the 5.37 coupon rate, or is it always a bit below the coupon rate?

Thanks so much for any insight.
LCX
exodusNH
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by exodusNH »

LCX2000 wrote: Sun May 12, 2024 12:45 pm I have been buying T-bill through my brokerage. I have been researching here at BH but haven't found my answer. (101 stuff here, so my apologies.)

I am trying to ascertain how much I am paying to buy them through my brokerage v directly through TD (where I buy iBonds.)

As an example: On Monday, auction day, 05/06/2024 the Discount rate for the 26 week t-bill was: 5.16 with the coupon rate: 5.37

If I had bought at my brokerage that day I would get a rate a bit below the 5.37.

I am trying to understand if I buy at Treasury Direct (or with other brokerages) would I get the 5.37 coupon rate, or is it always a bit below the coupon rate?

Thanks so much for any insight.
LCX
If you buy at new issue anywhere, everyone gets the same rate. Every broker will have their own estimate for new issues. As the rate isn't set until auction, they're all guessing.

If you buy in the secondary market, the rate you get varies by broker (depending on where they source the bonds -- there aren't actually megamarkets like NASDAQ or NYSE for bonds) and by quantity. You usually get slightly better pricing when buying $50,000+.

Holding Treasuries at Treasury Direct is somewhat inconvenient, because you can't sell them early. If you wind up needing the money, you'd have to transfer them to a brokerage.
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by Sandtrap »

no fees for new issue
i buy through both fidelity and vanguard
both allow me to use trust account funds
treasury direct does not

j🌺
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Topic Author
LCX2000

Re: T-Bills My Brokerage v Treasury Direct or Other

Post by LCX2000 »

Thank you, exodusNH and Sandtrap.

I am confused because I place my orders on Thursdays. My brokerage buys on Mondays at auction. When I look later at Treasury.gov, I am not getting the posted auction coupon rate.

I am trying to understand if the posted auction date coupon rate on Treasury.gov is the competitive institution rate, and I am getting the NON-competitive rate which is slightly slower OR am I basically paying a fee to my brokerage with the difference in the posted rate and what I ultimately get.
Geologist
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by Geologist »

For T-bills, you should concentrate on the price you pay, rather than concentrating on what interest rate is reported.

The competitive and non-competitive rates and prices are the same at the auction. In the (perhaps?) unlikely case that your brokerage charges a fee for buying Treasuries at auction, then you could pay a higher price. That, however, has nothing to do with the results of the auction itself, where the results for both non-competitive and competitive bidders are identical.
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by Artsdoctor »

LCX2000 wrote: Sun May 12, 2024 1:37 pm Thank you, exodusNH and Sandtrap.

I am confused because I place my orders on Thursdays. My brokerage buys on Mondays at auction. When I look later at Treasury.gov, I am not getting the posted auction coupon rate.

I am trying to understand if the posted auction date coupon rate on Treasury.gov is the competitive institution rate, and I am getting the NON-competitive rate which is slightly slower OR am I basically paying a fee to my brokerage with the difference in the posted rate and what I ultimately get.
You might be referring to the "coupon rate" as an estimated best guess. For example, when you place an order to purchase your T-bills at auction at your broker (let's say Fidelity), it'll give you an estimated yield. However, that is merely an estimate based on what's trading on the secondary market at the time that the option to order was set up. The actual yield at auction may be similar but sometimes can be quite different if the market is volatile. I don't know about TreasuryDirect but the price you'd get at auction would be identical there as well as your broker.

I would not pay attention to what the estimated yield might be at auction based on your broker's order page--or I'd take it with a grain of salt. If you want something more up to date, then try the Bloomberg site or the WSJ site.
Geologist
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by Geologist »

Here is the actual auction press release for the 5/6/24 26-week bill auction: https://www.treasurydirect.gov/instit/a ... 0506_2.pdf

Note first that there is just one set of results, not one for competitive and one for non-competitive.

Note then that the equivalent to the coupon rate is not 5.37% but 5.366%. Your figure has been rounded off. The price was 97.393861. You should be able to multiple that times your maturity ("face") value and get what you paid.
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by RyeBourbon »

T-bills don't have a coupon rate. I think you're looking at YTM (yield to maturity).

Just look at the price you paid. The price at auction was 97.393861 - what did you pay?
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lostcoast2023
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by lostcoast2023 »

I am not a fan of Treasury Direct. I think their only advantage is that you can buy in $100 increments instead of $1,000. If that is not extremely important to you, just buy at your brokerage.
Last edited by lostcoast2023 on Sun May 12, 2024 2:02 pm, edited 1 time in total.
Geologist
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by Geologist »

RyeBourbon wrote: Sun May 12, 2024 1:50 pm T-bills don't have a coupon rate. I think you're looking at YTM (yield to maturity).

Just look at the price you paid. The price at auction was 97.393861 - what did you pay?
In fact, T-bills have an "investment rate", which is the coupon-equivalent yield. See the press release pdf I linked in my previous post. That interest rate, rounded off, is what the OP appears to be listing.
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by CuriousGeorgeTx »

Sandtrap wrote: Sun May 12, 2024 1:01 pm no fees for new issue
i buy through both fidelity and vanguard
both allow me to use trust account funds
treasury direct does not

j🌺
We opened a TD account for our RLT without any problems, and have used it for a year.
Topic Author
LCX2000

Re: T-Bills My Brokerage v Treasury Direct or Other

Post by LCX2000 »

Geologist wrote: Sun May 12, 2024 1:47 pm Here is the actual auction press release for the 5/6/24 26-week bill auction: https://www.treasurydirect.gov/instit/a ... 0506_2.pdf

Note first that there is just one set of results, not one for competitive and one for non-competitive.

Note then that the equivalent to the coupon rate is not 5.37% but 5.366%. Your figure has been rounded off. The price was 97.393861. You should be able to multiple that times your maturity ("face") value and get what you paid.
Thank you for the link. Yes, I see these are rounded off. And if I am understanding you correctly, then neither the
High rate of: 5.155% nor the
Investment rate of: 5.366%
tell me what my return is???

I am guessing that I am paying 97.393861 per $100?? Then if true, doesn't that only give me a yield of 2.676?

I'd like to get more T-bills but want to make sure I am not paying my brokerage to buy them for me.

Thank you!
Geologist
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by Geologist »

Yields you see quoted are annualized. You just bought a 26-week bill, so it won't be outstanding for a whole year, so you won't earn the 5+% interest assumed in annualized quotes.

I'm not sure why you are "guessing" what you paid. The bill auctioned last Monday and was issued on the 9th. Your brokerage should have issued a confirmation and debited your account for it by now.
Topic Author
LCX2000

Re: T-Bills My Brokerage v Treasury Direct or Other

Post by LCX2000 »

Geologist wrote: Sun May 12, 2024 2:59 pm Yields you see quoted are annualized. You just bought a 26-week bill, so it won't be outstanding for a whole year, so you won't earn the 5+% interest assumed in annualized quotes.

I'm not sure why you are "guessing" what you paid. The bill auctioned last Monday and was issued on the 9th. Your brokerage should have issued a confirmation and debited your account for it by now.
I am just seeing this. Thank you for the reply. I have spent the days since we last posted doing a deep dive to better understand. I found that last purchase I made and found the purchase price and ultimately what it paid out when it came due. I don't have the numbers in front of me but on the listing at treasury.gov for the daily pricing it showed 5.37 and the coupon equivalent of 5.53. When I ran the numbers it came out to a 5.4% return. If I read correctly, what the actual price was that my broker paid would not necessarily yield what is listed.

Basically, I wanted to determine what percent I earned, not how much I paid. (For me this is about understanding how I want to build a portfolio for retirement. And in using calculators some are asking what percent I am earning.

The question I now have for my broker is why did only get a 5.4% return when treasury.gov listed that day's auction as 5.53.
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by BirdFood »

LCX2000 wrote: Tue May 14, 2024 9:59 pm
Geologist wrote: Sun May 12, 2024 2:59 pm Yields you see quoted are annualized. You just bought a 26-week bill, so it won't be outstanding for a whole year, so you won't earn the 5+% interest assumed in annualized quotes.

I'm not sure why you are "guessing" what you paid. The bill auctioned last Monday and was issued on the 9th. Your brokerage should have issued a confirmation and debited your account for it by now.
I am just seeing this. Thank you for the reply. I have spent the days since we last posted doing a deep dive to better understand. I found that last purchase I made and found the purchase price and ultimately what it paid out when it came due. I don't have the numbers in front of me but on the listing at treasury.gov for the daily pricing it showed 5.37 and the coupon equivalent of 5.53. When I ran the numbers it came out to a 5.4% return. If I read correctly, what the actual price was that my broker paid would not necessarily yield what is listed.

Basically, I wanted to determine what percent I earned, not how much I paid. (For me this is about understanding how I want to build a portfolio for retirement. And in using calculators some are asking what percent I am earning.

The question I now have for my broker is why did only get a 5.4% return when treasury.gov listed that day's auction as 5.53.
But the amount you paid can be used to calculate what you earned. (Or will earn.) You have no idea what you paid?

Edited to add:

If you paid 97.393861, I think your annualized interest would be

((((100-97.393861)/97.393861)*100)/182)*365=5.3664

But I could be deeply confused.
Last edited by BirdFood on Tue May 14, 2024 11:13 pm, edited 2 times in total.
FactualFran
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by FactualFran »

LCX2000 wrote: Sun May 12, 2024 2:22 pm Thank you for the link. Yes, I see these are rounded off. And if I am understanding you correctly, then neither the
High rate of: 5.155% nor the
Investment rate of: 5.366%
tell me what my return is???

I am guessing that I am paying 97.393861 per $100?? Then if true, doesn't that only give me a yield of 2.676?

I'd like to get more T-bills but want to make sure I am not paying my brokerage to buy them for me.
The return is 2.676% over the term of the T-Bill, and that return corresponds to an annual return of 5.366%.

You paid 97.393861 per $100 and 182 days later you will be paid $100, which is an increase of 2.676%, 2.67588% to a few more digits. The investment rate in the auction results is the rate of increase over 182 days to a few more digits divided by 182 multiplied by 365 (days between the issue date and the same day of the year one year later). The result of that calculation is 5.366%. If you calculate a different investment rate, you are not doing the calculations as the Treasury does the calculations.

[edit: corrected investment rates that had digits transposed.]
Topic Author
LCX2000

Re: T-Bills My Brokerage v Treasury Direct or Other

Post by LCX2000 »

BirdFood wrote: Tue May 14, 2024 10:14 pm
LCX2000 wrote: Tue May 14, 2024 9:59 pm
Geologist wrote: Sun May 12, 2024 2:59 pm Yields you see quoted are annualized. You just bought a 26-week bill, so it won't be outstanding for a whole year, so you won't earn the 5+% interest assumed in annualized quotes.

I'm not sure why you are "guessing" what you paid. The bill auctioned last Monday and was issued on the 9th. Your brokerage should have issued a confirmation and debited your account for it by now.
I am just seeing this. Thank you for the reply. I have spent the days since we last posted doing a deep dive to better understand. I found that last purchase I made and found the purchase price and ultimately what it paid out when it came due. I don't have the numbers in front of me but on the listing at treasury.gov for the daily pricing it showed 5.37 and the coupon equivalent of 5.53. When I ran the numbers it came out to a 5.4% return. If I read correctly, what the actual price was that my broker paid would not necessarily yield what is listed.

Basically, I wanted to determine what percent I earned, not how much I paid. (For me this is about understanding how I want to build a portfolio for retirement. And in using calculators some are asking what percent I am earning.

The question I now have for my broker is why did only get a 5.4% return when treasury.gov listed that day's auction as 5.53.
But the amount you paid can be used to calculate what you earned. (Or will earn.) You have no idea what you paid?

Edited to add:

If you paid 97.393861, I think your annualized interest would be

((((100-97.393861)/97.393861)*100)/182)*365=5.3664

But I could be deeply confused.
No, that would be me. :happy But yes, I finally figured this out. An annual rate of 5.3664, and I only held the t-bill for 26 weeks.

Thanks for the reply!
Topic Author
LCX2000

Re: T-Bills My Brokerage v Treasury Direct or Other

Post by LCX2000 »

FactualFran wrote: Tue May 14, 2024 11:06 pm
LCX2000 wrote: Sun May 12, 2024 2:22 pm Thank you for the link. Yes, I see these are rounded off. And if I am understanding you correctly, then neither the
High rate of: 5.155% nor the
Investment rate of: 5.366%
tell me what my return is???

I am guessing that I am paying 97.393861 per $100?? Then if true, doesn't that only give me a yield of 2.676?

I'd like to get more T-bills but want to make sure I am not paying my brokerage to buy them for me.
The return is 2.676% over the term of the T-Bill, and that return corresponds to an annual return of 5.366%.

You paid 97.393861 per $100 and 182 days later you will be paid $100, which is an increase of 2.676%, 2.67588% to a few more digits. The investment rate in the auction results is the rate of increase over 182 days to a few more digits divided by 182 multiplied by 365 (days between the issue date and the same day of the year one year later). The result of that calculation is 5.366%. If you calculate a different investment rate, you are not doing the calculations as the Treasury does the calculations.

[edit: corrected investment rates that had digits transposed.]

Yes, I finally figured this out. I could figure out the percent, but I still don't understand if my broker is basically charging me a fee by giving me a lower than posted rate, or if that was indeed the rate he could get for me? Trying to get as much info as possible before asking questions of broker.

Thank you for the reply!
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by Rocinante Rider »

T bills are zero coupon bonds sold at a discount so they don't have a coupon rate. The "investment rate" is based on a 365 day annualized yield and the "high rate" is based on a 360 day "annualized" yield. I think it has to do with the fact that the bond market assumes 12 thirty-day months per year. It's just a different way of calculating the yield, without practical implications. For most purposes, the investment rate is the apples to apples comparison to look at.
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by FactualFran »

LCX2000 wrote: Wed May 15, 2024 9:05 am Yes, I finally figured this out. I could figure out the percent, but I still don't understand if my broker is basically charging me a fee by giving me a lower than posted rate, or if that was indeed the rate he could get for me? Trying to get as much info as possible before asking questions of broker.
Look at the transaction history of the account. If the dollar amount of the transaction to pay for the T-Bill corresponds to 97.393861 per $100 of par amount, then you were not charged a fee in addition to the auction price.

Brokers got for their clients the sum of the par amounts for which their clients placed an order with the broker to buy at the auction.
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by LCX2000 »

FactualFran wrote: Wed May 15, 2024 12:05 pm
LCX2000 wrote: Wed May 15, 2024 9:05 am Yes, I finally figured this out. I could figure out the percent, but I still don't understand if my broker is basically charging me a fee by giving me a lower than posted rate, or if that was indeed the rate he could get for me? Trying to get as much info as possible before asking questions of broker.
Look at the transaction history of the account. If the dollar amount of the transaction to pay for the T-Bill corresponds to 97.393861 per $100 of par amount, then you were not charged a fee in addition to the auction price.

Brokers got for their clients the sum of the par amounts for which their clients placed an order with the broker to buy at the auction.
Interesting. This sounds as if the price I paid was the best my broker could do for all their clients like me.

As to the price paid that is listed, it just shows the rounded off 97. I'll need to go back farther in time to see how others were listed to see if decimal points were included there.

Thank you.
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by BirdFood »

LCX2000 wrote: Wed May 15, 2024 12:12 pm Interesting. This sounds as if the price I paid was the best my broker could do for all their clients like me.
I think that's just the price, set by auction, for everyone. For your broker to give you a lower price would mean taking money out of their pocket. I don't mean giving up commission--I mean they'd have to give you a gift.

Edited to add: But it is odd that they're apparently so severely rounding the unit price reported to you. I just got a confirmation from Schwab that gave me the unit price to five places after the decimal point.
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by RetiredAL »

I buy T-bills exclusively at the brokerage for the primary reason of their ease of their liquidity.
123
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by 123 »

RetiredAL wrote: Wed May 15, 2024 12:37 pm I buy T-bills exclusively at the brokerage for the primary reason of their ease of their liquidity.
+1 Agreed. Generally brokerage is so much better and easier than Treasury Direct for lots of reasons. The one case I know of where Treasury Direct is better than brokerage is Schwab. Schwab loses points for the poor and limited way they handle automatic reinvestments and poor return on cash balances awaiting investment or trade settlement.
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LCX2000
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by LCX2000 »

BirdFood wrote: Wed May 15, 2024 12:20 pm
LCX2000 wrote: Wed May 15, 2024 12:12 pm Interesting. This sounds as if the price I paid was the best my broker could do for all their clients like me.
I think that's just the price, set by auction, for everyone. For your broker to give you a lower price would mean taking money out of their pocket. I don't mean giving up commission--I mean they'd have to give you a gift.

Edited to add: But it is odd that they're apparently so severely rounding the unit price reported to you. I just got a confirmation from Schwab that gave me the unit price to five places after the decimal point.
I dug a little deeper. I found a 26-month T-bill that was purchased for me at auction on 10/30/23. It shows I paid 97.31. I looked up the price (v. the rates) on treasury.gov and the auction price for that T-bill was 97.310444.

My takeaway from this thread is that the rate posted is not particularly relevant. Rather I have to look up the price/$100 actually paid to then allow me to calculate the % return. Moving forward I won't do this. But I wanted to make sure I understood.

Thank you.
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by RetiredAL »

123 wrote: Wed May 15, 2024 12:46 pm
RetiredAL wrote: Wed May 15, 2024 12:37 pm I buy T-bills exclusively at the brokerage for the primary reason of their ease of their liquidity.
+1 Agreed. Generally brokerage is so much better and easier than Treasury Direct for lots of reasons. The one case I know of where Treasury Direct is better than brokerage is Schwab. Schwab loses points for the poor and limited way they handle automatic reinvestments and poor return on cash balances awaiting investment or trade settlement.
I have accounts at both Fidelity and Schwab.

The Schwab 'core' has not been issue for me. I just manually sell some MMK, place the order, then on day the maturing T-bill hits the core, I re-buy the MMK. These are 1yr T-bills, so losing out on MMK interest rate for a few day's is not a big deal, definitely not a 'sky has fallen' issue.
123
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by 123 »

RetiredAL wrote: Wed May 15, 2024 1:09 pm ...These are 1yr T-bills, so losing out on MMK interest rate for a few day's is not a big deal, definitely not a 'sky has fallen' issue.
With Schwab the difference between a "purchased MMF" and the default settlement runs close to 5% now. On a $100K trade you lose $13 a day in interest, on a $250K trade you lose $34 a day in interest. If you make a $50K TIPS auction purchase you can have 8+ days between auction and settlement and lose $50+ in interest due to Schwab's practices. When I get in bean-counter mode Schwab's practices really annoy me. We moved most of our accounts to Fidelity but there are a couple of accounts still there where we track cash activity very carefully. Schwab's interest rate practices raise the cost of "free" trades quite a bit compared to Fidelity.

When I see extra costs at brokerages like this I also consider the investment returns potential over the following 30 - 50 years that I lose. If you count beans, every bean counts, even beans not yet born.
The closest helping hand is at the end of your own arm.
FactualFran
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by FactualFran »

LCX2000 wrote: Wed May 15, 2024 12:12 pm
FactualFran wrote: Wed May 15, 2024 12:05 pm Look at the transaction history of the account. If the dollar amount of the transaction to pay for the T-Bill corresponds to 97.393861 per $100 of par amount, then you were not charged a fee in addition to the auction price.
Interesting. This sounds as if the price I paid was the best my broker could do for all their clients like me.

As to the price paid that is listed, it just shows the rounded off 97. I'll need to go back farther in time to see how others were listed to see if decimal points were included there.
Look at the dollar amount of the transaction, not what is listed as the price per $100. For example, if the par amount purchased was $10,000, was the dollar amount $9,739.39?

The broker did what you asked: buy a certain par amount of a Treasury security at auction. With an auction that issues more of a previously issued Treasury security, it is possible that a price on the secondary market prior to the auction was lower than what the auction price ended up being. However, "buy at a price lower that what the auction price ends up being" is not an option.
LCX2000
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by LCX2000 »

FactualFran wrote: Wed May 15, 2024 1:46 pm
LCX2000 wrote: Wed May 15, 2024 12:12 pm
FactualFran wrote: Wed May 15, 2024 12:05 pm Look at the transaction history of the account. If the dollar amount of the transaction to pay for the T-Bill corresponds to 97.393861 per $100 of par amount, then you were not charged a fee in addition to the auction price.
Interesting. This sounds as if the price I paid was the best my broker could do for all their clients like me.

As to the price paid that is listed, it just shows the rounded off 97. I'll need to go back farther in time to see how others were listed to see if decimal points were included there.
Look at the dollar amount of the transaction, not what is listed as the price per $100. For example, if the par amount purchased was $10,000, was the dollar amount $9,739.39?

The broker did what you asked: buy a certain par amount of a Treasury security at auction. With an auction that issues more of a previously issued Treasury security, it is possible that a price on the secondary market prior to the auction was lower than what the auction price ended up being. However, "buy at a price lower that what the auction price ends up being" is not an option.
Here is my math:
What I purchased t-bill for: (X)
What t-bill was worth when it came due: (Y)
X/Y = .9731044/182 = .005344673 return

This is what my broker purchased the T-bill for, and that is the listed price. So I am relieved! I am not paying a hidden fee.

Thank you!
RetiredAL
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by RetiredAL »

123 wrote: Wed May 15, 2024 1:34 pm
RetiredAL wrote: Wed May 15, 2024 1:09 pm ...These are 1yr T-bills, so losing out on MMK interest rate for a few day's is not a big deal, definitely not a 'sky has fallen' issue.
With Schwab the difference between a "purchased MMF" and the default settlement runs close to 5% now. On a $100K trade you lose $13 a day in interest, on a $250K trade you lose $34 a day in interest. If you make a $50K TIPS auction purchase you can have 8+ days between auction and settlement and lose $50+ in interest due to Schwab's practices. When I get in bean-counter mode Schwab's practices really annoy me. We moved most of our accounts to Fidelity but there are a couple of accounts still there where we track cash activity very carefully. Schwab's interest rate practices raise the cost of "free" trades quite a bit compared to Fidelity.

When I see extra costs at brokerages like this I also consider the investment returns potential over the following 30 - 50 years that I lose. If you count beans, every bean counts, even beans not yet born.
If it annoys you that much, when move the T-bill $ (or the whole account) to Fidelity. No one brokerage is perfect at everything.

I'm retired and I spend more beans a day for a going out to eat, which I often do, even though it's not 'essential'. But then again, I just took my grown kids and the grands to Costa Rica for a family vacation and that was not an essential expense either.

You remind me of a Cost Control Mgr many years ago. He had a gallon sized jar of beans on his desk with a label on it that said, "Yes, I know EXACTLY how many beans are in this jar!"
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jeffyscott
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by jeffyscott »

RetiredAL wrote: Wed May 15, 2024 1:09 pm
123 wrote: Wed May 15, 2024 12:46 pm
RetiredAL wrote: Wed May 15, 2024 12:37 pm I buy T-bills exclusively at the brokerage for the primary reason of their ease of their liquidity.
+1 Agreed. Generally brokerage is so much better and easier than Treasury Direct for lots of reasons. The one case I know of where Treasury Direct is better than brokerage is Schwab. Schwab loses points for the poor and limited way they handle automatic reinvestments and poor return on cash balances awaiting investment or trade settlement.
I have accounts at both Fidelity and Schwab.

The Schwab 'core' has not been issue for me. I just manually sell some MMK, place the order, then on day the maturing T-bill hits the core, I re-buy the MMK. These are 1yr T-bills, so losing out on MMK interest rate for a few day's is not a big deal, definitely not a 'sky has fallen' issue.
At Schwab you can, instead, just sell the money market the day before the T-bill settles, so that both trades settle the same day. The money market balance is, effectively, "cash" available for trading, but must be sold manually.
FactualFran
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by FactualFran »

LCX2000 wrote: Wed May 15, 2024 2:03 pm Here is my math:
What I purchased t-bill for: (X)
What t-bill was worth when it came due: (Y)
X/Y = .9731044/182 = .005344673 return

This is what my broker purchased the T-bill for, and that is the listed price. So I am relieved! I am not paying a hidden fee.
Although you are relieved, I am confused. Here you state that at an auction you purchased a t-bill for .9731044. However, in the opening post you wrote:
LCX2000 wrote: Sun May 12, 2024 12:45 pm As an example: On Monday, auction day, 05/06/2024 the Discount rate for the 26 week t-bill was: 5.16 with the coupon rate: 5.37
Others have posted that results of that auction includes the price having been 97.393861 per $100. It looks as if the price per $1 that you paid of .9731044 was less than the price determined by the auction of .97393861.

I have no idea what the result of dividing .9731044 by 182 represents. The resulting value is 0.534673%, which is about a tenth of the investment rate reported in the auction results of 5.366%.

Recently, I purchased a T-Bill at auction. The result of dividing the dollar amount in the account history by the par amount purchased is 0.95050613. To the seven significant digits of the dollar amount in the account history, that is equivalent to the price in the auction results of 95.050611 per $100.
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AnnetteLouisan
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by AnnetteLouisan »

lostcoast2023 wrote: Sun May 12, 2024 1:56 pm I am not a fan of Treasury Direct. I think their only advantage is that you can buy in $100 increments instead of $1,000. If that is not extremely important to you, just buy at your brokerage.
Other benefits of Treasury Direct
- auto roll is limited to 2 (or 3?) years then your money is deposited into your linked bank account or C of I. With Fidelity for example you have to turn off autoroll to end it.
- no fees, hidden or otherwise.
- no bankruptcy risk / $500k SIPC limit.
- no advertising
LCX2000
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by LCX2000 »

FactualFran wrote: Wed May 15, 2024 5:55 pm
LCX2000 wrote: Wed May 15, 2024 2:03 pm Here is my math:
What I purchased t-bill for: (X)
What t-bill was worth when it came due: (Y)
X/Y = .9731044/182 = .005344673 return

This is what my broker purchased the T-bill for, and that is the listed price. So I am relieved! I am not paying a hidden fee.
Although you are relieved, I am confused. Here you state that at an auction you purchased a t-bill for .9731044. However, in the opening post you wrote:
LCX2000 wrote: Sun May 12, 2024 12:45 pm As an example: On Monday, auction day, 05/06/2024 the Discount rate for the 26 week t-bill was: 5.16 with the coupon rate: 5.37
Others have posted that results of that auction includes the price having been 97.393861 per $100. It looks as if the price per $1 that you paid of .9731044 was less than the price determined by the auction of .97393861.

I have no idea what the result of dividing .9731044 by 182 represents. The resulting value is 0.534673%, which is about a tenth of the investment rate reported in the auction results of 5.366%.

Recently, I purchased a T-Bill at auction. The result of dividing the dollar amount in the account history by the par amount purchased is 0.95050613. To the seven significant digits of the dollar amount in the account history, that is equivalent to the price in the auction results of 95.050611 per $100.
Yes, I have definitely caused confusion, unintentionally. When I started the thread I knew very little, and simply posted a recent auction % posted on treasury.gov in hopes of having purchase price and my return explained. Since the initial question, based on comments, I have learned where to actually look for the numbers from treasury.gov, which is a separate landing page from where I was going. Then I was able to go to my account and load past transactions and find what I paid and what I earned. I've done the math in several different ways, but since my last post finally figured it all out.

Basically, I have learned that I paid what I was supposed to pay for the amount I expected to get in return. So I am square with my broker. And I learned a lot in the process!

Thank you!
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#Cruncher
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by #Cruncher »

LCX2000 wrote: Wed May 15, 2024 12:55 pm... I found a 26-month T-bill that was purchased for me at auction on 10/30/23. It shows I paid 97.31. I looked up the price (v. the rates) on treasury.gov and the auction price for that T-bill was 97.310444.
LCX2000 wrote: Wed May 15, 2024 2:03 pm... Here is my math:
What I purchased t-bill for: (X)
What t-bill was worth when it came due: (Y)
X/Y = .9731044/182 = .005344673 return
As FactualFran points out here, this is not how to calculate the annual return of a T-bill purchase. Here is how it should be done: [*]
  • First we calculate the return over the term of the bill.
    2.7639% = 100 / 97.310444 - 1
  • Then we annualize it. Note that there are 366 days in the year following the 11/02/2023 issue date.
    5.558% = 0.027639 * (366 / 182)
  • We can, of course, combine this into one step:
    5.558% = (100 / 97.31044 - 1) * (366 / 182)
  • This agrees with the Investment Rate shown on the auction results PDF.
* This is for bills maturing in one-half year or less. A much more complicated formula is needed for ones maturing in more than one-half of a year as shown on pages 2 and 3 of Price, Yield and Rate Calculations for a Treasury Bill.
LCX2000
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Re: T-Bills My Brokerage v Treasury Direct or Other

Post by LCX2000 »

#Cruncher wrote: Thu May 16, 2024 6:47 am
LCX2000 wrote: Wed May 15, 2024 12:55 pm... I found a 26-month T-bill that was purchased for me at auction on 10/30/23. It shows I paid 97.31. I looked up the price (v. the rates) on treasury.gov and the auction price for that T-bill was 97.310444.
LCX2000 wrote: Wed May 15, 2024 2:03 pm... Here is my math:
What I purchased t-bill for: (X)
What t-bill was worth when it came due: (Y)
X/Y = .9731044/182 = .005344673 return
As FactualFran points out here, this is not how to calculate the annual return of a T-bill purchase. Here is how it should be done: [*]
  • First we calculate the return over the term of the bill.
    2.7639% = 100 / 97.310444 - 1
  • Then we annualize it. Note that there are 366 days in the year following the 11/02/2023 issue date.
    5.558% = 0.027639 * (366 / 182)
  • We can, of course, combine this into one step:
    5.558% = (100 / 97.31044 - 1) * (366 / 182)
  • This agrees with the Investment Rate shown on the auction results PDF.
* This is for bills maturing in one-half year or less. A much more complicated formula is needed for ones maturing in more than one-half of a year as shown on pages 2 and 3 of Price, Yield and Rate Calculations for a Treasury Bill.
Thanks so much for taking the time to explain this. Yes, it has been a huge learning curve for me over the life of this thread. After I posted my last "math" I realized I had gotten close, but then my last calculation was incorrect. Your detailed calculation makes it even clearer.

At the end of all this I have learned a lot, including confirmation that my broker is selling me the t-bill for exactly what he should be selling it to me for, which was my initial concern. So all is good and I appreciate everyone's patience with me!
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