US T bills - first time user

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Kevin M
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Re: US T bills - first time user

Post by Kevin M » Sat Jun 09, 2018 3:13 pm

bayview wrote:
Sat Jun 09, 2018 2:38 pm
Thanks, Kevin. I appreciate your reply, but my problem was that this info is often ephemeral. Although I was able to do all that and make comparisons when the Treasuries were available during auction, much of this vanishes afterwards. Similar issue when the bond markets are closed, which is the only time I can log on and mess around. (And yes, it was the new Treasuries, not new issue CDs, that I was ranting about.)
The market is closed now, yet the 3-month and 6-month Treasury auctions are open, and you can enter a buy order right now if you want. You'll see the "Buy" link to the left of Treasuries for which the auctions are open and you can enter an order (the 3-year, 10-year and 30-year also are open).

The auctions for 3-month and 6-month Treasuries open every Thursday morning, and close early Monday morning, so you can enter a buy order for them any time in between, day or night, weekday or weekend.

As far as the information vanishing at Vanguard, that's when you can go to TD and look at the investment rate in the auction result PDF.
I was able to use the information at the time I was buying, but since different things were bought at different times, I'm now trying to figure out what (if anything) I did right, lol.

Use the TD site to get the investment rate for the bills, and use the yield to maturity on the confirmations for the CDs.
btw, the recent run-up in CD's is doubtless due to the fact that we purchased them in early-to-mid April, and the coupon for each is now pretty much exactly that of the next-younger CD (the 3-year CD pays what the 2-years now pay, the 2-year now pays what the 18-months pay, etc.) You're welcome, everyone. :annoyed :D
Treasury and CD rates all have been rising fairly steadily since September of 2017. I started buying quite a lot of brokered CDs, individual munis, and a few Treasuries in December 2017, so I feel your pain. But it's the same for anyone who's holding fixed income in just about any form, which is why we see low or negative YTD and 1-year returns for bond funds, for example. Whether holding funds or individual securities, we've lost money lately.

Even direct CDs have essentially lost value, unless you have no early withdrawal penalty (EWP), and can close the CD with no penalty to open or buy another one at today's rates (available at some credit unions for IRA CDs if age 59 1/2 or older--I did one of these recently). Of course if your CD rate is low enough compared to today's rates, and your EWP is low enough, you could be better off than someone with a bond fund or brokered security, since your EWP could be less than the loss of market value in a fund or brokered security.

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Re: US T bills - first time user

Post by Doc » Sat Jun 09, 2018 3:31 pm

Regarding T-Bill quotes with Yield to Maturity data:

WSJ Data Center

Image

http://www.wsj.com/mdc/public/page/2_30 ... #treasuryB

No subscription needed.

This data is of the last market "close". During market hours you can get up to date quotes from your broker. If you can't you need to get another broker.
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Re: US T bills - first time user

Post by bayview » Sat Jun 09, 2018 3:40 pm

Doc wrote:
Sat Jun 09, 2018 3:31 pm
Regarding T-Bill quotes with Yield to Maturity data:

WSJ Data Center

Image

http://www.wsj.com/mdc/public/page/2_30 ... #treasuryB

No subscription needed.

This data is of the last market "close". During market hours you can get up to date quotes from your broker. If you can't you need to get another broker.
Thank you for the link. By mid-October (retirement), I'll have my day hours free!
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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Re: US T bills - first time user

Post by Kevin M » Sat Jun 09, 2018 6:27 pm

bayview wrote:
Sat Jun 09, 2018 3:40 pm
Thank you for the link. By mid-October (retirement), I'll have my day hours free!
I hope you understand by now that you do not need your day hours free to buy Treasuries at auction. You also don't need day hours free to look up the yields on the TD site I provided the link to to determine the yields you got for Tbills you bought.

You only need day hours free if you want to buy (or sell) on the secondary market, or for some reason look at quotes on the secondary market.

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Re: US T bills - first time user

Post by MnD » Wed Jun 20, 2018 7:05 pm

Purchased my first US T bill (13 week) at auction this week with 25% of what I had in Schwab Prime MM at 1.83%.
Investment rate on the auction results was 1.936% and with our state tax rate that corresponds to 2.03% taxable equivalent.
I plan to do this every 4 weeks until I have a rolling ladder with 75% in T-bills and 25% in Prime MM.
No aspirations of getting rich but I learned something new and seems like a pretty harmless way to tinker.
https://www.treasurydirect.gov/instit/a ... 0618_2.pdf

Not sure on a few details of rollover - the 13 week bills auction on Mondays and settle on Thursdays with maturity dates 13 weeks out also on Thursdays. Makes me wonder if within a given week I can buy at auction on the Monday prior to a bill maturing Thursday of that week without incurring a margin balance, since the maturity of the old bill and settlement date of the newly purchased bill are on the same day.

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Re: US T bills - first time user

Post by Doc » Thu Jun 21, 2018 7:22 am

MnD wrote:
Wed Jun 20, 2018 7:05 pm
Not sure on a few details of rollover - the 13 week bills auction on Mondays and settle on Thursdays with maturity dates 13 weeks out also on Thursdays. Makes me wonder if within a given week I can buy at auction on the Monday prior to a bill maturing Thursday of that week without incurring a margin balance, since the maturity of the old bill and settlement date of the newly purchased bill are on the same day.
You should have no margin cost. That said I had a similar situation happen at Schwab several years ago but I made several unrelated trades during the interim which led to an erroneous trade violation which they later fixed. The problem was due to the Treasury debit posting before opening and the credit posting after close.

I changed the account to a margin account but since then have never let a Treasury mature so I don't know if they fixed their algorithm. But I do sell the T the day before the auction settlement date with no margin cost.
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Re: US T bills - first time user

Post by MnD » Thu Jun 21, 2018 8:46 am

Doc wrote:
Thu Jun 21, 2018 7:22 am
MnD wrote:
Wed Jun 20, 2018 7:05 pm
Not sure on a few details of rollover - the 13 week bills auction on Mondays and settle on Thursdays with maturity dates 13 weeks out also on Thursdays. Makes me wonder if within a given week I can buy at auction on the Monday prior to a bill maturing Thursday of that week without incurring a margin balance, since the maturity of the old bill and settlement date of the newly purchased bill are on the same day.
You should have no margin cost. That said I had a similar situation happen at Schwab several years ago but I made several unrelated trades during the interim which led to an erroneous trade violation which they later fixed. The problem was due to the Treasury debit posting before opening and the credit posting after close.
Thanks Doc. I will try it next month (buy T-bill at Monday auction with settlement funds coming from a T-bill maturing on Thursday) and report back. The liquidity on these things are amazing - bid/ask spread of .002. I guess I should have known that given the 90-day bill has the reputation as one of the most liquid financial instruments in the world but seeing that in my account makes it real.

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Re: US T bills - first time user

Post by triceratop » Thu Jun 21, 2018 9:30 am

MnD wrote:
Wed Jun 20, 2018 7:05 pm
Purchased my first US T bill (13 week) at auction this week with 25% of what I had in Schwab Prime MM at 1.83%.
Investment rate on the auction results was 1.936% and with our state tax rate that corresponds to 2.03% taxable equivalent.
I plan to do this every 4 weeks until I have a rolling ladder with 75% in T-bills and 25% in Prime MM.
No aspirations of getting rich but I learned something new and seems like a pretty harmless way to tinker.
https://www.treasurydirect.gov/instit/a ... 0618_2.pdf

Not sure on a few details of rollover - the 13 week bills auction on Mondays and settle on Thursdays with maturity dates 13 weeks out also on Thursdays. Makes me wonder if within a given week I can buy at auction on the Monday prior to a bill maturing Thursday of that week without incurring a margin balance, since the maturity of the old bill and settlement date of the newly purchased bill are on the same day.
I recently asked a Schwab rep this question. You may find this post useful: viewtopic.php?f=1&t=244645&p=3951325&hi ... n#p3951969
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: US T bills - first time user

Post by Doc » Thu Jun 21, 2018 9:43 am

triceratop wrote:
Thu Jun 21, 2018 9:30 am
MnD wrote:
Wed Jun 20, 2018 7:05 pm
Purchased my first US T bill (13 week) at auction this week with 25% of what I had in Schwab Prime MM at 1.83%.
Investment rate on the auction results was 1.936% and with our state tax rate that corresponds to 2.03% taxable equivalent.
I plan to do this every 4 weeks until I have a rolling ladder with 75% in T-bills and 25% in Prime MM.
No aspirations of getting rich but I learned something new and seems like a pretty harmless way to tinker.
https://www.treasurydirect.gov/instit/a ... 0618_2.pdf

Not sure on a few details of rollover - the 13 week bills auction on Mondays and settle on Thursdays with maturity dates 13 weeks out also on Thursdays. Makes me wonder if within a given week I can buy at auction on the Monday prior to a bill maturing Thursday of that week without incurring a margin balance, since the maturity of the old bill and settlement date of the newly purchased bill are on the same day.
I recently asked a Schwab rep this question. You may find this post useful: viewtopic.php?f=1&t=244645&p=3951325&hi ... n#p3951969
That's a different question. MnD is asking about settlement dates and margin costs not auto rollovers.
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Re: US T bills - first time user

Post by triceratop » Thu Jun 21, 2018 10:26 am

Doc wrote:
Thu Jun 21, 2018 9:43 am
triceratop wrote:
Thu Jun 21, 2018 9:30 am
MnD wrote:
Wed Jun 20, 2018 7:05 pm
Purchased my first US T bill (13 week) at auction this week with 25% of what I had in Schwab Prime MM at 1.83%.
Investment rate on the auction results was 1.936% and with our state tax rate that corresponds to 2.03% taxable equivalent.
I plan to do this every 4 weeks until I have a rolling ladder with 75% in T-bills and 25% in Prime MM.
No aspirations of getting rich but I learned something new and seems like a pretty harmless way to tinker.
https://www.treasurydirect.gov/instit/a ... 0618_2.pdf

Not sure on a few details of rollover - the 13 week bills auction on Mondays and settle on Thursdays with maturity dates 13 weeks out also on Thursdays. Makes me wonder if within a given week I can buy at auction on the Monday prior to a bill maturing Thursday of that week without incurring a margin balance, since the maturity of the old bill and settlement date of the newly purchased bill are on the same day.
I recently asked a Schwab rep this question. You may find this post useful: viewtopic.php?f=1&t=244645&p=3951325&hi ... n#p3951969
That's a different question. MnD is asking about settlement dates and margin costs not auto rollovers.
I think they are related. I should say also, I don't have a margin account and they allowed this. So this is just their means of allowing their customers to do rollovers.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: US T bills - first time user

Post by MnD » Thu Jun 21, 2018 10:27 am

yes, the topics are related.
Schwab doesn't have an auto-rollover but it appears from Triceratops inquiry that the timing I proposed for manual rollovers (maturity date same data as settlement date of new purchase) will work at Schwab.

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Re: US T bills - first time user

Post by Doc » Thu Jun 21, 2018 10:59 am

Nitpick for clarity.

Selling a Treasury one business day before settlement or having one mature on the settlement date of a new Treasury purchased either on the open market or at auction is "allowed" by (SEC?) regulations.

Whether or not rolling a maturing Treasury into a new Treasury automatically is an individual broker's policy.

I think we all agree. :D
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Re: US T bills - first time user

Post by triceratop » Thu Jun 21, 2018 11:14 am

Doc wrote:
Thu Jun 21, 2018 10:59 am
Selling a Treasury one business day before settlement or having one mature on the settlement date of a new Treasury purchased either on the open market or at auction is "allowed" by (SEC?) regulations.
Sure, but we see enormous variation amongst various brokers' policies regarding equity/stock ETFs and settlements so it is far from obvious something subtle like this would work as you might best expect it from a customer perspective.

Now we all agree :)
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Re: US T bills - first time user

Post by Doc » Thu Jun 21, 2018 11:57 am

Trade Settlement:

Mutual funds:
Mutual funds can be bought and sold daily. However, unlike equities and other types of securities that trade on the secondary market throughout each trading day, share transactions in a fund are carried out once each day after the close of market at 4 p.m. EST (Eastern Standard Time). With the exception of money market mutual funds, the clearing of a trade transaction is executed over the following one to three business days, depending on the fund company and the type of fund.
https://www.investopedia.com/ask/answer ... z5J4tTESOW

Stocks & ETFs:

The Securities and Exchange Commission's new rule amendment
The T+2 rule amendment applies to the same securities transactions that were covered by the T+3 settlement cycle. These include transactions for stocks, bonds, municipal securities, exchange-traded funds, certain mutual funds and limited partnerships that trade on an exchange. The T+2 requirement does not apply to certain other categories of securities, such as exempted securities.
http://www.finra.org/investors/highligh ... wo-is-here

Treasuries:

(I'm having trouble finding a good reference here.) As far as I know treasury notes and bonds settle on the next business day for market transactions and some other time for new issues as specified in the auction announcement. But for T-bills I found this:
Treasury bills are about the only security that can be transacted and settled on the same day.
Read more: What do T+1, T+2 and T+3 mean? | Investopedia https://www.investopedia.com/ask/answer ... z5J50AhNgb
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Re: US T bills - first time user

Post by danielc » Sun Jul 15, 2018 6:08 pm

Kevin M wrote:
Thu May 24, 2018 12:07 pm
In other threads, we've discovered that Schwab seems to give higher yields for minimum quantity 10 than does Fidelity--maybe even higher than for larger quantities. They appear to be making buying Treasuries more attractive for small investors--perhaps to attract and retain their business.
Just so I'm clear ... this is a non-issue if I buy at the auction through Fidelity. Right? I'm pretty sure I have the correct answer but I'd rather ask.

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Re: US T bills - first time user

Post by Kevin M » Sun Jul 15, 2018 8:41 pm

danielc wrote:
Sun Jul 15, 2018 6:08 pm
Kevin M wrote:
Thu May 24, 2018 12:07 pm
In other threads, we've discovered that Schwab seems to give higher yields for minimum quantity 10 than does Fidelity--maybe even higher than for larger quantities. They appear to be making buying Treasuries more attractive for small investors--perhaps to attract and retain their business.
Just so I'm clear ... this is a non-issue if I buy at the auction through Fidelity. Right? I'm pretty sure I have the correct answer but I'd rather ask.
Yes. It's a non-issue for purchases at auction using any broker that doesn't charge a commission (like Fidelity or Vanguard), since you get the same price/yield as the institutional investors buying millions of dollars worth of the same issue.

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Re: US T bills - first time user

Post by MnD » Sat Jul 28, 2018 10:21 am

The yield on the 13-week bill should start moving from the 2% range to the 2.25% range soon.
About two months prior to quarterly FOMC meetings where rate hikes have been telegraphed is when things seem to get moving from the current target range to the expected one (see table below). My next scheduled 13 week bill purchase is the August 20 auction so hopefully I'll capture a fair share of the expected move by then. My ladder of 13-week notes rolling over every 4-5 weeks for 75% of cash with 25% in MM fund will be complete then.
https://www.treasury.gov/resource-cente ... &year=2018

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Re: US T bills - first time user

Post by gmaynardkrebs » Sat Jul 28, 2018 10:32 am

MnD wrote:
Sat Jul 28, 2018 10:21 am
The yield on the 13-week bill should start moving from the 2% range to the 2.25% range soon.
About two months prior to quarterly FOMC meetings where rate hikes have been telegraphed is when things seem to get moving from the current target range to the expected one (see table below). My next scheduled 13 week bill purchase is the August 20 auction so hopefully I'll capture a fair share of the expected move by then. My ladder of 13-week notes rolling over every 4-5 weeks for 75% of cash with 25% in MM fund will be complete then.
https://www.treasury.gov/resource-cente ... &year=2018
You don't think extending to 26 or 52 weeks would pay off?

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Re: US T bills - first time user

Post by MnD » Sat Jul 28, 2018 2:43 pm

gmaynardkrebs wrote:
Sat Jul 28, 2018 10:32 am
MnD wrote:
Sat Jul 28, 2018 10:21 am
The yield on the 13-week bill should start moving from the 2% range to the 2.25% range soon.
About two months prior to quarterly FOMC meetings where rate hikes have been telegraphed is when things seem to get moving from the current target range to the expected one (see table below). My next scheduled 13 week bill purchase is the August 20 auction so hopefully I'll capture a fair share of the expected move by then. My ladder of 13-week notes rolling over every 4-5 weeks for 75% of cash with 25% in MM fund will be complete then.
https://www.treasury.gov/resource-cente ... &year=2018
You don't think extending to 26 or 52 weeks would pay off?
Not with the fed raising rates every quarter and the yield curve getting flatter. And personally I'm just having fun with my spending account. My real emergency fund is 100% in stocks using this approach paired with the the TSP G fund at 2.875%.
https://www.bogleheads.org/wiki/Placing ... ed_account

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Re: US T bills - first time user

Post by jeffyscott » Thu Oct 25, 2018 1:51 pm

I have been buying T-bills at treasury direct for a few months, partly thanks to this discussion.

Today, I decided to give the brokerage route a try and bought a secondary treasury. I am now wondering how taxes work, when those are purchased at a premium or discount?

Just to try out the process, I bought a note that matures in February. The price was $1,000.94, plus accrued interest of $5.68. The yield is 2.75%, my understanding is that I will get $13.75 interest and $1000 principal, when it matures in Feb. Will the $0.94 premium be reported to me as a capital loss, when I get tax forms from the brokerage or will there just be a 1099 showing (net) interest earned as $7.13 ($1000 + $13.75 - $1000.94 - $5.68)?

I have looked for an answer online, but found conflicting and confusing information.
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Re: US T bills - first time user

Post by ofckrupke » Thu Oct 25, 2018 2:16 pm

jeffyscott wrote:
Thu Oct 25, 2018 1:51 pm
Just to try out the process, I bought a note that matures in February. The price was $1,000.94, plus accrued interest of $5.68. The yield is 2.75%, my understanding is that I will get $13.75 interest and $1000 principal, when it matures in Feb. Will the $0.94 premium be reported to me as a capital loss, when I get tax forms from the brokerage or will there just be a 1099 showing (net) interest earned as $7.13 ($1000 + $13.75 - $1000.94 - $5.68)?
What should happen is that
a) broker reports the $5.68 interest you paid in the 2018 year, and you can log this as a negative number on schedule B, netting it against other sources of interest income for the year.
b) for year 2019, broker reports 13.75-0.94 = 12.81 as interest, and no capital loss (the bond/note's cost premium is amortized).

The subtlety is that for WI state taxation you need to add the $5.68 back in to your 2018 interest income (if WI income is all referenced to federal income, with adjustments applied by taxpayer relating to differences in Fed and WI taxation), since it's state-exempt US treasury interest. But likewise, the $12.81 isn't WI-taxable for year 2019.

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Re: US T bills - first time user

Post by Doc » Thu Oct 25, 2018 2:24 pm

Deleted - missed it was Bills.
Last edited by Doc on Thu Oct 25, 2018 3:06 pm, edited 1 time in total.
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Re: US T bills - first time user

Post by ofckrupke » Thu Oct 25, 2018 3:06 pm

Doc wrote:
Thu Oct 25, 2018 2:24 pm
The officer is on the right path but you don't get it all in one year.
Yeah, ok, correct. Federally, one may choose whether to amortize premium bonds. To do so, one must choose on the first applicable tax return. But one's broker may opt as a matter of policy to amortize unless told otherwise, effectively choosing for the accountholder. (I think the rationale is that it's almost never advantageous for the taxpayer to claim a loss rather than to ABP-adjust interest income downward by the same amount.) If amortization is chosen, then the broker pretty much needs to report an APB adjustment even for a (premium) bond that hasn't yet paid a coupon to the accountholder at the end of the first year held.

So if the broker's policy is to amortize by default and the OP doesn't tell them otherwise, then for this security presumably they will show an ABP adjustment of what sounds like about 56c in 2018, and 38c in 2019, rather than accounting for the whole 94c in 2019.

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Re: US T bills - first time user

Post by jeffyscott » Thu Oct 25, 2018 5:25 pm

ofckrupke wrote:
Thu Oct 25, 2018 3:06 pm
So if the broker's policy is to amortize by default and the OP doesn't tell them otherwise, then for this security presumably they will show an ABP adjustment of what sounds like about 56c in 2018, and 38c in 2019, rather than accounting for the whole 94c in 2019.
As best as I can tell it may be that Schwab does amortize by default? I found a document from them, aimed at advisors, that seems to say that.

http://content.schwab.com/web/as/public ... oolkit.pdf
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Re: US T bills - first time user

Post by ofckrupke » Thu Oct 25, 2018 8:38 pm

Outstanding find.

In particular the part where they say they will adjust cost basis (along a constant yield curve by default) to amortize premium only at coupon dates rather than daily, from Dec 2016 onward. If this is true then it means no automatic adjustment at year's end (for non 31Dec/30Jun dated securities), so your 2.75% note maturing on 15 Feb 2019 and bought in Oct 2018 should produce no ABP-adjustment for 2018, and all of the 94c premium would be amortized/adjusted in 2019 (in absence of a letter from you contravening the default: to amortize).
The method described in the Schwab document matches what they've done so far in 2018 with a premium UST note maturing in May 2019 that I bought in Jan 2018. In my statements the adjusted cost basis sat fixed until the coupon in May, then adjusted downward by an amount matching my constant-yield calculation for the date, and has held steady since then. Sounds like it will adjust again with the Nov coupon, but then no further than that for the 2018 1099-int - unless I sell it before year's end. I can live with that.
Last edited by ofckrupke on Thu Oct 25, 2018 8:43 pm, edited 1 time in total.

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Re: US T bills - first time user

Post by 4nwestsaylng » Thu Oct 25, 2018 8:42 pm

I use Schwab, very easy online, no fees. I buy the zero coupon 3 and 6 months Treasuries. I put an order in to buy at market, they trade rapidly, and the market is very efficient.

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Re: US T bills - first time user

Post by jeffyscott » Thu Oct 25, 2018 10:09 pm

ofckrupke wrote:
Thu Oct 25, 2018 8:38 pm
In particular the part where they say they will adjust cost basis (along a constant yield curve by default) to amortize premium only at coupon dates rather than daily, from Dec 2016 onward. If this is true then it means no automatic adjustment at year's end (for non 31Dec/30Jun dated securities), so your 2.75% note maturing on 15 Feb 2019 and bought in Oct 2018 should produce no ABP-adjustment for 2018, and all of the 94c premium would be amortized/adjusted in 2019 (in absence of a letter from you contravening the default: to amortize).

The method described in the Schwab document matches what they've done so far in 2018 with a premium UST note maturing in May 2019 that I bought in Jan 2018. In my statements the adjusted cost basis sat fixed until the coupon in May, then adjusted downward by an amount matching my constant-yield calculation for the date, and has held steady since then. Sounds like it will adjust again with the Nov coupon, but then no further than that for the 2018 1099-int - unless I sell it before year's end. I can live with that.
Thanks for mentioning that they show the adjusted cost basis on the statements. That was something I'd also been wondering about. I suppose they would change the cost basis that they show on line, too.

Not that it matters in this case, but it seems to me it would be easier to not amortize? Easier to track and easier to check that things are correct on 1099s?

From that document it appears that one can request that they not amortize anytime up to Dec. 31 and it would retroactively cover the whole year. I may look into that next year, if I decide to continue with individual treasuries in taxable, unless there is some downside to not amortizing. It seems that anything I buy yet this year will not actually be amortized in any case, since there would be no coupons paid.

I have some secondary CDs but since they are in an IRA, I'd not paid any attention to the cost basis that they show. They were all bought at discount, now looking at the past statements I see that there have been no changes to cost basis and some have paid a coupon. But perhaps not being a taxable account, means they don't make these cost basis adjustments.
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Re: US T bills - first time user

Post by gmaynardkrebs » Thu Oct 25, 2018 10:16 pm

I no longer hold premium bonds in taxable accounts. I really don't know or want to learn how to do the amortization myself, and my experience with Vanguard is that their calculations are not reliable,

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Re: US T bills - first time user

Post by ofckrupke » Thu Oct 25, 2018 10:58 pm

jeffyscott wrote:
Thu Oct 25, 2018 10:09 pm
Thanks for mentioning that they show the adjusted cost basis on the statements. That was something I'd also been wondering about. I suppose they would change the cost basis that they show on line, too.
Yes, I can confirm that. Personally I'd prefer daily adjustment along the constant yield curve since that would help illustrate the capital gain/loss impact of a sale on any day contemplated (though the base plan is to hold to maturity, barring great carnage in equity markets). Not having a handle on that is a bit like being blind to wash sale effects on stocks/funds. But I do have a daily basis adjustment column in a private excel ledger.
jeffyscott wrote:
Thu Oct 25, 2018 10:09 pm
Not that it matters in this case, but it seems to me it would be easier to not amortize? Easier to track and easier to check that things are correct on 1099s?
To me it seems easier to not bother jumping through the hoops required to deviate from the default treatments of premium OR market discount bonds, unless a big change in tax bracket is imminent and due to that I'd rather recognize discount accretion income in year(s) prior to anticipated disposition/maturity (and even then, could dispose late in the year prior to the bracket change). And since UST premium must be amortized for state tax accounting since the interest income is state tax exempt, electing not to amortize federally would mean managing two sets of cost bases. So while I too considered otherwise initially, I have come around to favoring Schwab's defaults.

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Re: US T bills - first time user

Post by Doc » Fri Oct 26, 2018 6:46 am

Re Schwab amoritaztion schedule:

When they changed from "daily" to coupon date they not only lost the year end number but also lost the amount on early sale as far as I can tell.

(They never really got to daily. It was more like twice a week but I could never figure out the exact schedule. I think they used a random number generator. :D )
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: US T bills - first time user

Post by jeffyscott » Fri Oct 26, 2018 7:13 am

ofckrupke wrote:
Thu Oct 25, 2018 10:58 pm
And since UST premium must be amortized for state tax accounting since the interest income is state tax exempt, electing not to amortize federally would mean managing two sets of cost bases. So while I too considered otherwise initially, I have come around to favoring Schwab's defaults.
Thanks, did not realize that. I had seen that tax-exempt bonds are required to be amortized but did not think of that applying to the state tax exemption for treasuries. I will stick to the default.
press on, regardless - John C. Bogle

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Re: US T bills - first time user

Post by jeffyscott » Fri Oct 26, 2018 7:24 am

gmaynardkrebs wrote:
Thu Oct 25, 2018 10:16 pm
I no longer hold premium bonds in taxable accounts. I really don't know or want to learn how to do the amortization myself, and my experience with Vanguard is that their calculations are not reliable,
I may ultimately decide not to have bonds in taxable at all. We don't have much of a taxable account to begin with and being retired, I may switch what little we do have to a US stock fund and pay 0% Fed tax on cap gains and most dividends. Especially now that the assets that we should spend first would seem to me to be some old 0% I-bonds.
press on, regardless - John C. Bogle

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Re: US T bills - first time user

Post by Doc » Fri Oct 26, 2018 8:13 am

jeffyscott wrote:
Fri Oct 26, 2018 7:24 am
gmaynardkrebs wrote:
Thu Oct 25, 2018 10:16 pm
I no longer hold premium bonds in taxable accounts. I really don't know or want to learn how to do the amortization myself, and my experience with Vanguard is that their calculations are not reliable,
I may ultimately decide not to have bonds in taxable at all. We don't have much of a taxable account to begin with and being retired, I may switch what little we do have to a US stock fund and pay 0% Fed tax on cap gains and most dividends. Especially now that the assets that we should spend first would seem to me to be some old 0% I-bonds.
If you are in the Social Security phase in situation your cap gains rate is not zero.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: US T bills - first time user

Post by gmaynardkrebs » Fri Oct 26, 2018 8:25 am

Doc wrote:
Fri Oct 26, 2018 8:13 am
If you are in the Social Security phase in situation your cap gains rate is not zero.
Ok, I tried to figure this out via google before bothering you, but I failed. Can you explain a little? Thanks! :happy

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Re: US T bills - first time user

Post by jeffyscott » Fri Oct 26, 2018 8:29 am

Doc wrote:
Fri Oct 26, 2018 8:13 am
jeffyscott wrote:
Fri Oct 26, 2018 7:24 am
gmaynardkrebs wrote:
Thu Oct 25, 2018 10:16 pm
I no longer hold premium bonds in taxable accounts. I really don't know or want to learn how to do the amortization myself, and my experience with Vanguard is that their calculations are not reliable,
I may ultimately decide not to have bonds in taxable at all. We don't have much of a taxable account to begin with and being retired, I may switch what little we do have to a US stock fund and pay 0% Fed tax on cap gains and most dividends. Especially now that the assets that we should spend first would seem to me to be some old 0% I-bonds.
If you are in the Social Security phase in situation your cap gains rate is not zero.
No SS yet...and, actually, will never be in the phase-in, pensions put us in the 85% taxable range for SS.
press on, regardless - John C. Bogle

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Re: US T bills - first time user

Post by gmaynardkrebs » Fri Oct 26, 2018 8:39 am

jeffyscott wrote:
Fri Oct 26, 2018 8:29 am
Doc wrote:
Fri Oct 26, 2018 8:13 am
jeffyscott wrote:
Fri Oct 26, 2018 7:24 am
gmaynardkrebs wrote:
Thu Oct 25, 2018 10:16 pm
I no longer hold premium bonds in taxable accounts. I really don't know or want to learn how to do the amortization myself, and my experience with Vanguard is that their calculations are not reliable,
I may ultimately decide not to have bonds in taxable at all. We don't have much of a taxable account to begin with and being retired, I may switch what little we do have to a US stock fund and pay 0% Fed tax on cap gains and most dividends. Especially now that the assets that we should spend first would seem to me to be some old 0% I-bonds.
If you are in the Social Security phase in situation your cap gains rate is not zero.
No SS yet...and, actually, will never be in the phase-in, pensions put us in the 85% taxable range for SS.
So when you are in the 85% range, cap gains are not taxed?

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Re: US T bills - first time user

Post by jeffyscott » Fri Oct 26, 2018 9:19 am

gmaynardkrebs wrote:
Fri Oct 26, 2018 8:39 am
So when you are in the 85% range, cap gains are not taxed?
85% of SS benefit is taxed at $44,000 for a couple. The 0% long term cap gains rate goes to just over $100K gross ($77,200 + $24,000 std deduction), so yes.
press on, regardless - John C. Bogle

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Re: US T bills - first time user

Post by Doc » Fri Oct 26, 2018 9:25 am

gmaynardkrebs wrote:
Fri Oct 26, 2018 8:25 am
Doc wrote:
Fri Oct 26, 2018 8:13 am
If you are in the Social Security phase in situation your cap gains rate is not zero.
Ok, I tried to figure this out via google before bothering you, but I failed. Can you explain a little? Thanks! :happy
"How Social Security Income is Taxed" https://blog.turbotax.intuit.com/income ... axed-7676/

I used a "bad" term when I said that capital gains are taxed. The capital gains themselves are not taxed but the capital gains causes more of the SS to be taxed.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: US T bills - first time user

Post by MnD » Sun Oct 28, 2018 9:26 am

Update of Doc's chart from page 2.
In 2018 the 13-week is still maintaining a very nice premium over the fed funds rate and the 4-week is right on top of it.
Not the case in 2016-17.
Still pleased with 3-bill ladder at Schwab maturing 4, 9 and 13 weeks out, (25% in each) plus 25% in Money Market.

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