6 and 12 MO CD's or Treasury Bills

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dollarsaver
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6 and 12 MO CD's or Treasury Bills

Post by dollarsaver » Sun Feb 18, 2018 1:28 pm

Hi Bogleheads,

Have a couple of large non-retirement CD's maturing next month. Need to reinvest this money in my personal Vanguard account as fixed income. I will go short term. Do you recommend 6-12 month CD's or 6-12 month Treasury Bills.
Thanks for all advice

acanthurus
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Post by acanthurus » Sun Feb 18, 2018 1:30 pm

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Last edited by acanthurus on Sun Apr 08, 2018 10:30 am, edited 1 time in total.

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laidback_and_relaxed
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Re: 6 and 12 MO CD's or Treasury Bills

Post by laidback_and_relaxed » Sun Feb 18, 2018 2:17 pm

I've been purchasing short term CDs and Treasury Bills for several years now, as part of a diversified portfolio and in my retirement accounts. I'll go for the higher yield at the time the money comes available. I favor Treasury Bills, zero coupons, since I can engage the money immediately for return. Brokered CDs require a few days or more lag where my money doesn't earn anything, waiting for the CD to be closed and added to my portfolio.

Dominic
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Re: 6 and 12 MO CD's or Treasury Bills

Post by Dominic » Sun Feb 18, 2018 2:23 pm

The spread between T-bills and CDs looks pretty narrow right now. I'd trade a few basis points of yield for the extra liquidity and safety of Treasuries. (The FDIC doesn't guarantee interest rates, and might take a few days to reimburse you, particularly with a brokered CD.)

thx1138
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Re: 6 and 12 MO CD's or Treasury Bills

Post by thx1138 » Sun Feb 18, 2018 4:01 pm

If in a high tax state and investing in a taxable account don't forget T-bill interest is excluded from state tax.

mega317
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Re: 6 and 12 MO CD's or Treasury Bills

Post by mega317 » Sun Feb 18, 2018 4:11 pm

Right now treasuries win out for a year or under because they are yielding more. If state tax is a consideration it's even better.

mega317
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Re: 6 and 12 MO CD's or Treasury Bills

Post by mega317 » Sun Feb 18, 2018 4:12 pm

I guess it should be asked what are you hoping to learn from this thread that you couldn't get in 2 minutes on Vanguards website?

Scooter57
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Re: 6 and 12 MO CD's or Treasury Bills

Post by Scooter57 » Sun Feb 18, 2018 11:15 pm

Any reason why you can't use the NASA Credit Union 2.25% 11mo CD?

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whodidntante
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Re: 6 and 12 MO CD's or Treasury Bills

Post by whodidntante » Sun Feb 18, 2018 11:25 pm

Treasuries are liquid and the dividends are exempt from state income tax.

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whodidntante
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Re: 6 and 12 MO CD's or Treasury Bills

Post by whodidntante » Sun Feb 18, 2018 11:26 pm

Scooter57 wrote:
Sun Feb 18, 2018 11:15 pm
Any reason why you can't use the NASA Credit Union 2.25% 11mo CD?
The OP specified a Vanguard account.

123
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Re: 6 and 12 MO CD's or Treasury Bills

Post by 123 » Mon Feb 19, 2018 12:04 am

For me it's often a close call. Rates are often similar. Treasuries are easier to sell if something happens and you need to, you don't have to be concerned with FDIC limits.
The closest helping hand is at the end of your own arm.

manedark
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Re: 6 and 12 MO CD's or Treasury Bills

Post by manedark » Sat May 26, 2018 11:44 am

mega317 wrote:
Sun Feb 18, 2018 4:11 pm
Right now treasuries win out for a year or under because they are yielding more. If state tax is a consideration it's even better.
I just learnt about this - T-bills for 6 months at autcion is showing an indicative yield of 2.07% whereas the All Bank 6 months CD is 1.6%. If you reduce the CD rate by CA tax rate for me which is 9.3% the yield is 1.45%. That is a 62 basis points difference in favor of the T-Bills. What is the catch? (even the T-bills are, I think, more secure than CDs).

Grt2bOutdoors
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Re: 6 and 12 MO CD's or Treasury Bills

Post by Grt2bOutdoors » Sat May 26, 2018 12:09 pm

manedark wrote:
Sat May 26, 2018 11:44 am
mega317 wrote:
Sun Feb 18, 2018 4:11 pm
Right now treasuries win out for a year or under because they are yielding more. If state tax is a consideration it's even better.
I just learnt about this - T-bills for 6 months at autcion is showing an indicative yield of 2.07% whereas the All Bank 6 months CD is 1.6%. If you reduce the CD rate by CA tax rate for me which is 9.3% the yield is 1.45%. That is a 62 basis points difference in favor of the T-Bills. What is the catch? (even the T-bills are, I think, more secure than CDs).
No catch, Ally doesn't need the money, hence it offers a lower rate.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

manedark
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Re: 6 and 12 MO CD's or Treasury Bills

Post by manedark » Sat May 26, 2018 12:12 pm

Grt2bOutdoors wrote:
Sat May 26, 2018 12:09 pm
manedark wrote:
Sat May 26, 2018 11:44 am
mega317 wrote:
Sun Feb 18, 2018 4:11 pm
Right now treasuries win out for a year or under because they are yielding more. If state tax is a consideration it's even better.
I just learnt about this - T-bills for 6 months at autcion is showing an indicative yield of 2.07% whereas the All Bank 6 months CD is 1.6%. If you reduce the CD rate by CA tax rate for me which is 9.3% the yield is 1.45%. That is a 62 basis points difference in favor of the T-Bills. What is the catch? (even the T-bills are, I think, more secure than CDs).
No catch, Ally doesn't need the money, hence it offers a lower rate.
Got it, thanks, well the US Treasury will have it then :-)

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