Trading Treasuries (nominal and TIPS)

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Kevin M
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Trading Treasuries (nominal and TIPS)

Post by Kevin M »

There has been lots of interest in buying Treasuries (nominal and TIPS) lately, and I thought it would be useful to have a single thread where we could discuss buying (and selling) Treasuries. There hasn't been much talk about selling, but you might want to sell at some point, so I used "Trading" in the title rather than "Buying".

------------------- EDIT -----------------

I'm going to start adding links to key replies in this thread and to other web pages that provide useful info, so folks can use this post as sort of a reference, rather than searching the entire thread for key information. Please let me know if you think there are any other web pages or replies that should be included.

Web pages
Replies in this thread
Other relevant Bogleheads posts
--------------- END EDIT -----------------

I'd like to keep this focused on trading at brokers, not at TreasuryDirect, where you can't really "trade", because you can't sell.

I've been buying Treasuries (nominal and TIPS) in my Fidelity IRA. Here are the purchases I've made:

Image

Note that I bought 10 nominal and 10 TIPS in June of 2021, with the nominal yield at a ridiculous 0.16%. Normally I never would have done that, but I wanted to see how the nominal and TIPS performed. Fidelity shows the nominal with a gain/loss of -2.28%, and the TIPS with a gain/loss of -0.09%. The TIPS is ahead as expected due to higher than expected inflation, but not by as much as one might expect. Unlike the nominal, the TIPS yield has not increased by much, up from -2.89% on 6/8/2021 to -2.67% on 5/18/2022 (when I bought another 10).

All of my other purchases have been in April and May of this year.

From April to later in April or May, yields on a one of my nominals and one of my TIPS had increased by 20 basis points or more, so I bought 10 more of each.

Image
Image

Harry Sit has a blog post showing how to buy Treasuries at auction, so that's a good place to start. However, I have bought all of my Treasuries on the secondary market, so you'd start with the first few screens Harry Shows, but then deviate to get to secondary market securities. I could post some screenshots of how to buy on the secondary market at Fidelity, Vanguard and Schwab if people think it would be useful. Or someone else could do it.

I prefer buying on the secondary market since I know the yield I'm getting, and settlement is T+1 instead of potentially a number of days between auction and settlement. The spread between large and small orders has been quite small lately, so I don't think you're paying much of a premium to buy on the secondary market. Sometimes a new issue might have a yield a bit higher than expected though.

Please share your experience in trading Treasuries, or ask any questions you have about it.

Kevin
Last edited by Kevin M on Wed Aug 10, 2022 2:22 pm, edited 5 times in total.
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Re: Trading Treasuries (nominal and TIPS)

Post by protagonist »

This is great, Kevin. Thanks for doing this. I just subscribed to this thread.
Between July this year and mid- to late-2023 I have a lot of CDs maturing and I will be probably looking at TIPS to buy for the first time in years, because (other than I-bonds) they seem to be the only safe investments that come relatively close to current inflation rates and would only probably result in relatively small real losses in the next few years (I wouldn't look beyond 2-3 years or so).
Currently it does not seem that nominal Treasuries come close, and as I have no idea whether the Fed will be successful in taming inflation in the next couple of years I don't really see the logic in choosing them over TIPS, even in taxable accounts. If I am missing something there please explain.
Of course, the situation might change when I am ready to buy.
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Re: Trading Treasuries (nominal and TIPS)

Post by AlwaysLearningMore »

Thank you for posting this very good information.

I purchase at Treasury Direct because of the automatic rollover (up to 2 years), not available at Vanguard.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

AlwaysLearningMore wrote: Tue May 24, 2022 8:08 pm Thank you for posting this very good information.

I purchase at Treasury Direct because of the automatic rollover (up to 2 years), not available at Vanguard.
Fidelity provides auto-roll for auction purchases, and I think Schwab may too. Vanguard is behind the times on this.

However, since I buy in secondary market, auto-roll is not available to me, and I don't care.

Thanks for sharing,

Kevin
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Re: Trading Treasuries (nominal and TIPS)

Post by WoodSpinner »

Looks like Auto-Roll is not available for TIPS at Fidelity….

Eligible positions
Only Treasury auction securities, new-issue CDs with a term to maturity of 5 years or less, and certain CD strategies are eligible for this service. Treasury inflation-protected securities (TIPs), inflation-protected CDs (CDIPs or IFCDs), callable CDs, floating and adjustable rate CDs, and CD purchases exceeding $250,000 are all ineligible, as are all other fixed income instruments and all secondary Treasury or CD securities.
Auto Roll benefits

When your initial Treasury and CD investments mature, this service will help you identify reinvestment options according to the terms of the Auto Roll Service Agreement. While it helps you reinvest maturing principal, it will not monitor your accounts or investment decisions and you still need to pay attention to the Auto Roll alerts so you can take appropriate action.
https://www.fidelity.com/fixed-income-b ... ll-program

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Re: Trading Treasuries (nominal and TIPS)

Post by Atgard »

Thank you, Kevin M, for your threads on treasuries, I've learned a lot following them.

I bought my first treasuries on 4/11/22, very similar to yours: 2 years at 2.525% YTM. I was tempted when yields went up another couple of tenths, but instead I grabbed a 3-yr CD at 3% as the rates were slightly higher than treasuries.

I have been debating buying some more, but it seems like the sweet spot is still the 2-3y maturity range, and I was hoping for more of a ladder (so adding something around 1y, or even 5y if rates were high enough). I'm also debating holding off so I have dry powder if rates climb again. Do you see much chance of rates (for any durations, including 5-10y) getting up to 4% or more?
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Breakeven inflation (BEI)

Post by Kevin M »

One of the reasons I have bought, on the same dates, a few sets of nominal and TIPS maturing on the same date is that I can see the breakeven inflation (BEI) rate, and see how the nominal and TIPS in each set perform relative to the BEI. The commonly used BEI calculation is to subtract the TIPS yield from the nominal yield; there is a more accurate way to calculate it, but I'll stick with this for now.

Image

Note that I bought the first set on 6/28/2021, and the BEI was 3.06%. So far, inflation has exceeded the BEI, so the TIPS has done better. I bought a second set of these same securities on 5/18/2022, with a BEI of 4.93%. Those were 2-year securities when I first bought them, and now they are about 1-year. So if inflation exceeds 4.93% over the next year or so, the TIPS will do better, and vice versa.

The BEI is higher now because the nominal yield has increased much more than the TIPS yield.

As a quick aside, using today's quotes from Fidelity, you get up to a positive real yield with the 1/15/28 TIPS (5.65-year maturity) at 0.03%. Yields mostly go up from there as you extend maturity, peaking at 0.82% for the 2/15/45 (22.75 years), and declining from there to 0.62% for the 2/15/52 (29.75-year maturity).

Image

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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

WoodSpinner wrote: Tue May 24, 2022 8:50 pm Looks like Auto-Roll is not available for TIPS at Fidelity….

Eligible positions
Only Treasury auction securities, new-issue CDs with a term to maturity of 5 years or less, and certain CD strategies are eligible for this service. Treasury inflation-protected securities (TIPs), inflation-protected CDs (CDIPs or IFCDs), callable CDs, floating and adjustable rate CDs, and CD purchases exceeding $250,000 are all ineligible, as are all other fixed income instruments and all secondary Treasury or CD securities.
Auto Roll benefits

When your initial Treasury and CD investments mature, this service will help you identify reinvestment options according to the terms of the Auto Roll Service Agreement. While it helps you reinvest maturing principal, it will not monitor your accounts or investment decisions and you still need to pay attention to the Auto Roll alerts so you can take appropriate action.
https://www.fidelity.com/fixed-income-b ... ll-program

WoodSpinner
Thanks for setting us straight on this!

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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Atgard wrote: Tue May 24, 2022 8:57 pm Thank you, Kevin M, for your threads on treasuries, I've learned a lot following them.

I bought my first treasuries on 4/11/22, very similar to yours: 2 years at 2.525% YTM. I was tempted when yields went up another couple of tenths, but instead I grabbed a 3-yr CD at 3% as the rates were slightly higher than treasuries.

I have been debating buying some more, but it seems like the sweet spot is still the 2-3y maturity range, and I was hoping for more of a ladder (so adding something around 1y, or even 5y if rates were high enough). I'm also debating holding off so I have dry powder if rates climb again. Do you see much chance of rates (for any durations, including 5-10y) getting up to 4% or more?
I can't predict interest rates better than anyone else, but the trend does seem to have been mostly up lately.

As you can see from the Term column on the far right of the OP, I have been going out to about 2-year maturity for nominals and 3-year maturity for TIPS. This is because the yield curves are quite steep out to these maturities, and I'm playing the game of only extending maturity if I get a decent yield increase by doing so.

First chart shows yield curve for TIPS out to 5 years, and second post does same for nominals.

Image

Image

For TIPS, you get an extra 38 basis points for extending from 2.89-year to 3.89-year, but only 16 bps for extending from 3.89-year to 4.89-year.

For nominals, you only get 8 bps for extending from 3y to 4y, 19 bps for 2y to 3y, but 56 bps for extending from 1y to 2y.

Note that the TIPS yield curve shows both quoted ask yields and seasonally adjusted ask yields (using the Canty method for SA). That's a topic for another post.

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Buying at Fidelity on secondary market: detailed walkthrough

Post by Kevin M »

Kevin M wrote: Tue May 24, 2022 7:50 pm <snip>

Harry Sit has a blog post showing how to buy Treasuries at auction, so that's a good place to start. However, I have bought all of my Treasuries on the secondary market, so you'd start with the first few screens Harry Shows, but then deviate to get to secondary market securities. I could post some screenshots of how to buy on the secondary market at Fidelity, Vanguard and Schwab if people think it would be useful. Or someone else could do it.

<snip>
One thing I've found is that there sometimes are multiple ways to navigate to the web page you want to be on to buy Treasuries. As a first example, I get to the Fidelity fixed income web page differently than Harry shows in his blog post. He shows clicking on News & Research, then clicking on Fixed Income, Bonds & CDs.

Image

What I do is click on the Trade link on the upper left in the menu with the black background, then select Fixed Income.

Image

This takes me a page showing this:

Image

I then click on the Search Inventory link, which takes me to the Fixed Income, Bonds & CDs web page, with Bonds, US Treasury, secondary shown by default:

Image

I can then enter my search criteria or run a saved search, or change from Secondary to Auction, TIPS (Secondary), or TIPS (auction).

Now that I compare the two ways, Harry's way actually gets us to the bond page with less clicks. One difference is that his way you end up on the Yields tab, and my way you end up on the Bonds tab.

The Yields page is nice if you want to quickly compare yields on various types of fixed income. You can click on any of the yield links to see search results of about the indicated maturity. For example click on the 2yr US Treasury link, and a bond search results screen opens with maturities from 3/31/2024 to 6/15/2024. You can then select Edit to change your search criteria.

I usually go straight to the Bonds page when I want to buy, since I can select my maturity ranges that suit my preference.

Kevin
Last edited by Kevin M on Sun Jun 19, 2022 7:15 pm, edited 2 times in total.
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

Kevin M wrote: Tue May 24, 2022 9:54 pm One thing I've found is that there sometimes are multiple ways to navigate to the web page you want to be on to buy Treasuries. As a first example, I get to the Fidelity fixed income web page differently than Harry shows in his blog post. He shows clicking on News & Research, then clicking on Fixed Income, Bonds & CDs.
I do that, click on "news and research" and then select "Fixed Income, Bonds & CDs" in the drop down menu. Similarly on Schwab I go with "research" then pick "Bonds & Fixed Income", that goes to a similar interest rate overview. I like to start there since I can compare CD and treasury yields.

I don't use Vanguard, but they have a similar place that you can start. Their's can be seen without being logged on:
https://personal.vanguard.com/us/FixedIncomeHome
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Re: Trading Treasuries (nominal and TIPS)

Post by mega317 »

Kevin,
Could you share any more details on what you're tracking in your spreadsheet? A few questions I had:

-are you using a yield formula or manually typing what the website tells you? (I remember some discussion on another thread that the excel formula does not give results exactly consistent with what's reported by the brokers.)

-why is "amount" not equal to "price" x 100?

-what is the formula in the "interest" column?

Thanks!

I have been buying treasuries partially to "park" some cash that I will need soon-ish but not sure when, and also partially just as learning and experimenting. This forum has been extremely helpful and educational for that. I will say that after buying about 5 or 6 different CUSIPs that I'm considering giving it up and just using a short treasury fund. I don't see that extra time and effort is worth it at my dollar amounts (<100k range).
https://www.bogleheads.org/forum/viewtopic.php?t=6212
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

mega317 wrote: Tue May 24, 2022 10:26 pmI have been buying treasuries partially to "park" some cash that I will need soon-ish but not sure when, and also partially just as learning and experimenting. This forum has been extremely helpful and educational for that. I will say that after buying about 5 or 6 different CUSIPs that I'm considering giving it up and just using a short treasury fund. I don't see that extra time and effort is worth it at my dollar amounts (<100k range).
I don't know the answer to your questions, but am also inclined to (mostly) just use a fund for treasuries, since the ERs are so low. But since brokered CDs usually offer a yield advantage, I will probably continue to use those. All the money is in an IRA.

I had a similar amount to reinvest when a 2% CD matured and was not worth renewing, since treasury yields at the time were better than any CD (direct or brokered). By the time the money was back at the brokerage, brokered CDs had moved ahead of treasuries except for the shortest ones.

I ended up settling on getting a few treasuries for funds that might be needed for specific known expenses in the next year or so. (I may or may not actually use them for those expenses, it depends on how much we spend on other things in the intervening months.) Then, since brokered CD yields were a little better than treasuries, I put about $10K in a CD maturing every 6 months after that out to 4 years. For longer terms I was more comfortable with TIPS than nominals, so I bought 3 of those maturing in 6-10 years.

I put the leftover amount in a short-term bond index fund and a TIPS index fund, which can be also used to reinvest the coupon payments. And then I am thinking when the balance of either gets to $20K, I will consider buying an individual CD or TIPS. Other than for money that might be spent in about the next year, I am inclined to just use the short term bond index fund, if brokered CD yields are less than those for treasuries. For TIPS, I may continue to buy individual ones at 6-10 year maturities to supplement the fund as it seems to be weighted toward 1-5 years*. I am hoping to not have to resort to moving money out to direct CDs again.

*As of the end of March, the TIPS index fund that I looked at (SWRSX) had about 12-13% of assets in TIPS maturing each year for 2024, 2025, and 2026. Then for 2027-2031, it had about 6-8% maturing each year. 2032 was about 3%, nothing between that and 2040 (no TIPS exist in that range), the remaining ~16% mature in 2040-52 (so an average of 1.2% for each of those years, ranging from about 0.8% to 2%).
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Re: Trading Treasuries (nominal and TIPS)

Post by 50/50 »

Kevin, thank you for your work starting this thread. I have been buying secondary treasuries along and feel pretty comfortable with the process, but TIPS make my head hurt so I will be following along trying to learn more about them.

Thanks for all you do to educate us on this forum.

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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

Kevin M wrote: Tue May 24, 2022 8:22 pm Fidelity provides auto-roll for auction purchases, and I think Schwab may too. Vanguard is behind the times on this.
Charles Schwab wrote:What investments are eligible?
The following fixed income investments are eligible for rollover:

All new-issue and secondary market CDs
They can be rolled into new-issue 3-, 6-, 9-, 12-, 18-, 24-, and 60-month CDs.

New-issue Treasuries bought at auction
They can be rolled into 4-, 8-, 13-, and 26-week bills at auction.
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Re: Trading Treasuries (nominal and TIPS)

Post by Blues »

Thanks, Kevin, this is great for someone like myself who is not new to investing, but is new to buying treasuries in the secondary market as well as brokered CDs.

Truly appreciate the wisdom shared here. Even us old dogs can learn new tricks.
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

Kevin M wrote: Tue May 24, 2022 7:50 pm Please share your experience in trading Treasuries, or ask any questions you have about it.
I've been buying Treasuries both nominal and TIPS both at auction and on secondary market at both Schwab and Vanguard for some 20+ years. It's no big deal.

Benefits over funds include income payments only twice a year instead of twelve times, no wash sale issues, and ability to capture roll yield under normal yield curve conditions. Tax loss/gain harvesting is also often facilitated by using direct T's.

My philosophy is to only use Treasury funds/ETF's as a short term parking lot.
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Re: Breakeven inflation (BEI)

Post by protagonist »

Kevin M wrote: Tue May 24, 2022 8:59 pm One of the reasons I have bought, on the same dates, a few sets of nominal and TIPS maturing on the same date is that I can see the breakeven inflation (BEI) rate, and see how the nominal and TIPS in each set perform relative to the BEI. Those were 2-year securities when I first bought them, and now they are about 1-year. So if inflation exceeds 4.93% over the next year or so, the TIPS will do better, and vice versa.



Kevin
My thinking (please let me know if this makes sense to you, Kevin...you are the expert here....)

As a retiree, with the fixed income portion of my portfolio, my main concern is preservation of wealth, not losing too much in real terms to inflation. For growth (and its inherent risks) I rely on the stock market portion of my portfolio.

Thus, especially in a volatile environment such as today, where inflation could go in either direction and is so much higher today than nominal Treasury yields, "break even points" are irrelevant to me. I am not looking at long periods to maturity.

Assuming inflation is hovering in the 8-8.5% range today, if I buy a 2-3 yr. note and inflation drops, even to 1-2%, (and I would expect it to probably take at least a couple of years to get that low, or even to the range of current 2-3 yr. nominal Treasury note yields), I could conceivably do better with a nominal Treasury than with TIPS, but certainly not by that much, and either way I would not lose much to inflation.

On the other hand, if inflation stays high or even increases , say to 10-15%, I would get seriously hammered by nominal Treasuries in real terms, whereas I can feel secure that I would only be losing a little bit with TIPS, and I would know how much that would be when I invested. (Of course that is assuming I am investing money that I plan to hold to maturity).

So why would I (or most retirees) want to buy nominal Treasuries at all rather than 100% TIPS? Am I missing some crucial point here?
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Re: Trading Treasuries (nominal and TIPS)

Post by mega317 »

Doc wrote: Wed May 25, 2022 9:57 am Benefits over funds include income payments only twice a year instead of twelve times, no wash sale issues, and ability to capture roll yield under normal yield curve conditions. Tax loss/gain harvesting is also often facilitated by using direct T's.

My philosophy is to only use Treasury funds/ETF's as a short term parking lot.
This is helpful. And affirms my likely decision to stick to funds as I'm not so concerned about the listed benefits and a short term parking lot is my only need for treasuries at this point.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
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Re: Trading Treasuries (nominal and TIPS)

Post by drob »

Doc wrote: Wed May 25, 2022 9:57 am
Kevin M wrote: Tue May 24, 2022 7:50 pm Please share your experience in trading Treasuries, or ask any questions you have about it.
I've been buying Treasuries both nominal and TIPS both at auction and on secondary market at both Schwab and Vanguard for some 20+ years. It's no big deal.

Benefits over funds include income payments only twice a year instead of twelve times, no wash sale issues, and ability to capture roll yield under normal yield curve conditions. Tax loss/gain harvesting is also often facilitated by using direct T's.

My philosophy is to only use Treasury funds/ETF's as a short term parking lot.
+1, and even though ERs are small for treasury funds, why pay anything at all when you can bills and notes with no expense at all.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

mega317 wrote: Tue May 24, 2022 10:26 pm Kevin,
Could you share any more details on what you're tracking in your spreadsheet? A few questions I had:

-are you using a yield formula or manually typing what the website tells you? (I remember some discussion on another thread that the excel formula does not give results exactly consistent with what's reported by the brokers.)
I use the YIELD function, mostly since Fidelity doesn't show yield on the trade confirmation or activity and orders page, and then I check it against the yield shown on the trade confirmation. I could just wait until settlement and copy it from the trade confirmation.

For example, the YIELD function returns -2.666728% as the yield for the TIPS purchased on 5/18/2022, and the trade confirmation shows -2.666727 (%). That close enough for me.
mega317 wrote: Tue May 24, 2022 10:26 pm -why is "amount" not equal to "price" x 100?
Two reasons.

For nominals, there could be accrued interest, which increases the total amount. Of course you get this back with the first interest payment.

For TIPS, there could be accrued interest, but also the inflation adjustment. TIPS amount tends to be quite a bit higher due to the inflation adjustment. I didn't show the TIPS index ratios in the screenshot of the spreadsheet in the OP, but I have a column for that, and a number of other TIPS-related data.

Fidelity calls the index ratio the Inflation Factor, and includes it in the bond search results. You can also see it by clicking on the CUSIP number in order history on the day you buy, and looking at the Inflation Protected Information section. If you do this after the day you buy, the IF will have changed. The change to the IR/IF is how you get the inflation protection.

Here's the calculation for 912828VM9, maturing 7/15/2023.

The inflation index ratio (IR) for this TIPS was 1.22807 on the settlement date (it changes every day). So the inflation adjusted price is the quoted price times the IR.

103.609 * 1.22807 = 127.23910

So, for quantity 10 this is 12,723.91

Accrued interest is shown in order history and on the order confirmation. It was 15.65 for this TIPS, so

Amount = 12,723.91 + 15.65 = 12,739.56, which is the total amount paid.
mega317 wrote: Tue May 24, 2022 10:26 pm -what is the formula in the "interest" column?
I just enter it from the order history or trade confirmation. I hadn't yet entered it for the most recent TIPS purchase, but have now. You could also calculate it as the Amount (dirty) minus the amount without the accrued interest (clean).

Kevin
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Re: Trading Treasuries (nominal and TIPS)

Post by hirlaw »

What about treasuries that you buy at a premium in a tax deferred account?
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

hirlaw wrote: Wed May 25, 2022 2:39 pm What about treasuries that you buy at a premium in a tax deferred account?
What about it? In OP you can see that all TIPS and one nominal were bought at a premium (in an IRA). The premium is amortized over the remaining life of the bond, and for your yield will be lower than the coupon amount. The YTM calculation includes the amortized bond premium in the calculation.

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Re: Trading Treasuries (nominal and TIPS)

Post by WoodSpinner »

drob wrote: Wed May 25, 2022 12:48 pm
Doc wrote: Wed May 25, 2022 9:57 am
Kevin M wrote: Tue May 24, 2022 7:50 pm Please share your experience in trading Treasuries, or ask any questions you have about it.
I've been buying Treasuries both nominal and TIPS both at auction and on secondary market at both Schwab and Vanguard for some 20+ years. It's no big deal.

Benefits over funds include income payments only twice a year instead of twelve times, no wash sale issues, and ability to capture roll yield under normal yield curve conditions. Tax loss/gain harvesting is also often facilitated by using direct T's.

My philosophy is to only use Treasury funds/ETF's as a short term parking lot.
+1, and even though ERs are small for treasury funds, why pay anything at all when you can bills and notes with no expense at all.
How are you handling the coupon payouts and reinvestment?

Do you ever sell before maturity based on the yield curve?

Those are some of the reasons why I am in Funds vs. individual Treasuries. Still learning so your input is very welcome.

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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

WoodSpinner wrote: Wed May 25, 2022 3:09 pm How are you handling the coupon payouts and reinvestment?

Do you ever sell before maturity based on the yield curve?

Those are some of the reasons why I am in Funds vs. individual Treasuries. Still learning so your input is very welcome.
Coupons get put into a MM or another short term fund. They are accumulated and then invested in a new fund or reinvested in the original fund. Nickle and diming small cash funds is too time consuming and can lead to wash sale issues in taxable.

Yes, I sell before maturity. That's how one gets the benefit of the roll yield effect. See (I think): "Expected return of a bond fund" viewtopic.php?p=4546444#p4546444
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

I'd be interested in Kevin's answers to those same questions since, like me, he's using an IRA.

I'd not be inclined to sell before maturity and I'd reinvest coupon payments in a short term bond fund. So those are some of the reasons I am mostly planning to use a mutual fund for treasuries.

Maybe I get some benefit from the fund selling at 1 year. Distributions are automatically reinvested, without delay. And I'm actually using a short term bond index mutual fund, so I get a little extra yield from the ~25-30% corporate bonds that I would otherwise probably not own.

Since I just buy and hold to maturity, it usually makes more sense to go with CDs, if I am going to the trouble of buying an individual security. I do have Kevin to thank for introducing me to brokered CDs, I did not know they existed until he did that about 4 years ago.
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Re: Trading Treasuries (nominal and TIPS)

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jeffyscott wrote: Wed May 25, 2022 4:15 pm I'd be interested in Kevin's answers to those same questions since, like me, he's using an IRA.
I haven't even thought about it yet for the bonds recently purchased.

Coupon rates are mostly small, so interest payments will be small. They will go into my settlement fund, and then perhaps into a higher-yield MM fund. This will just then be part of my cash holdings until it gets moved into something else.

I do not plan to sell before maturity, but I might if better opportunities present themselves. Last time Treasury yields were competitive, I bought a bunch at Schwab in taxable. A great direct CD deal came along, so I sold all of my Treasuries in taxable to buy the CD, and ended up making about the same IRR on the Treasuries as I would of if held to maturity, and much more from the CD.

There is no such thing as "roll yield"; that's a term that someone just made up years ago in a post here, and unfortunately it got propagated. The typical way I see this idea expressed is as "rolldown return". Return is not the same as yield. Yield tells you in advance about what you will earn if held to maturity. There is no comparable yield related to possible rolldown return; i.e., nothing guaranteed in advance.

You might earn extra over the original YTM if the yield curve is favorable when you want to sell. If it is not, you could actually experience a rollup loss. So roll return can be positive or negative.

Finally, since I'm buying 6m to 3y securities, there's likely to be less roll return than if I was buying longer maturities. If the yield curve is such that I could earn significantly more than the original YTM buy selling before maturity, and I like the yield curve for slightly longer maturity, then sure, I might sell before maturity and reinvest in a longer maturity.
jeffyscott wrote: Wed May 25, 2022 4:15 pm Since I just buy and hold to maturity, it usually makes more sense to go with CDs, if I am going to the trouble of buying an individual security. I do have Kevin to thank for introducing me to brokered CDs, I did not know they existed until he did that about 4 years ago.
If a brokered CD provides a significant yield advantage, I would consider going for it, but only if I were certain that I'd hold to maturity, and if it is not callable. Brokered CDs have a much larger bid/ask spread than Treasuries, so can lose 1% or more if you sell before maturity.

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Re: Trading Treasuries (nominal and TIPS)

Post by Blues »

Kevin, "Protagonist" asked the following, and I'd be interested in your reply. I own no TIPS, as I still find them a mystery, so it would be of interest to me as well.
On the other hand, if inflation stays high or even increases , say to 10-15%, I would get seriously hammered by nominal Treasuries in real terms, whereas I can feel secure that I would only be losing a little bit with TIPS, and I would know how much that would be when I invested. (Of course that is assuming I am investing money that I plan to hold to maturity).

So why would I (or most retirees) want to buy nominal Treasuries at all rather than 100% TIPS? Am I missing some crucial point here?
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Re: Trading Treasuries (nominal and TIPS)

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I'm not Kevin, but as I mentioned, I am more comfortable with longer term TIPS than nominals. Fixed income allocation is certainly nowhere near 100% TIPS, but I don't have a lot of nominal treasuries either.

But, for terms where there are CDs available, the effective BEI rate can be much larger. Currently I see a 5 year CD at 3.3% (non-callable), 5 year nominal at about 2.7%, and 5 year TIPS at -0.28%. So, the 5 year BEI with a CD is 0.6% higher than it is with a treasury (at least in an IRA).

Note that, in the case of Schwab, to even buy the 5 year TIPS would require a calling. They do not allow online purchase of TIPS with negative yields. So there's the added burden of a phone call, in addition to the effective higher BEI via using a CD, to overcome. Those combined hurdles are much too high for me :mrgreen: . (Not that I have a lot of interest in buying a guaranteed negative real return, anyway)
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Re: Trading Treasuries (nominal and TIPS)

Post by protagonist »

jeffyscott wrote: Thu May 26, 2022 10:03 am I'm not Kevin, but as I mentioned, I am more comfortable with longer term TIPS than nominals. Fixed income allocation is certainly nowhere near 100% TIPS, but I don't have a lot of nominal treasuries either.

But, for terms where there are CDs available, the effective BEI rate can be much larger. Currently I see a 5 year CD at 3.3% (non-callable), 5 year nominal at about 2.7%, and 5 year TIPS at -0.28%. So, the 5 year BEI with a CD is 0.6% higher than it is with a treasury (at least in an IRA).

Note that, in the case of Schwab, to even buy the 5 year TIPS would require a calling. They do not allow online purchase of TIPS with negative yields. So there's the added burden of a phone call, in addition to the effective higher BEI via using a CD, to overcome. Those combined hurdles are much too high for me :mrgreen: . (Not that I have a lot of interest in buying a guaranteed negative real return, anyway)
My reluctance to buy a 5 year CD is that I expect the Fed to raise interest rates within the next couple of years. I expect a 3.3% 5 year CD to under-perform TIPS over at least the next year or two , and I expect CD rates will probably rise over the couple of years as interest rates rise. And yes, I am just guessing. I have no crystal ball. Your guess is probably as good as mine.

I agree that buying something with a guaranteed loss in real terms is a hard pill to swallow. But a 5 year CD at 3.3% is guaranteed to be losing about 5% in real terms right now if current inflation is what it has been over the past year, and you are locked in for 5 years (without paying a penalty). In this unstable environment I would only look at TIPS with less than 3 years maturity...my hit cf. inflation wouldn't be too severe in 2-3 years. Maybe in a couple of years I could buy something that could beat inflation. How long are you guessing that it will take for that 5% real loss via 5 year CD to reverse into a real gain? The current inflation rate could go in either direction. I would suspect it would take more than a couple of years at least, if at all.
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Re: Trading Treasuries (nominal and TIPS)

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On what basis are you able to determine the future real return of a CD bought today? The expected real return is positive, if the BEI vs a nominal Treasury is assumed to reflect expected inflation. And I know that's not an exact relationship, there's seasonality and the known, but not yet applied, inflation index ratios to consider. And also investor preferences for liquidity and inflation insurance can be factors.

There's no reason to assume that 5 year rates will rise, if the Fed does what they are already expected to do. Of course, they probably won't do what's expected, but future events could just as well lead to them doing less instead of more.

ETA: I should've said "...no reason to assume that 5 year yields will rise enough to offset the cost of waiting in shorter term securities..."
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Re: Trading Treasuries (nominal and TIPS)

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Blues wrote: Wed May 25, 2022 4:42 pm Kevin, "Protagonist" asked the following, and I'd be interested in your reply. I own no TIPS, as I still find them a mystery, so it would be of interest to me as well.
On the other hand, if inflation stays high or even increases , say to 10-15%, I would get seriously hammered by nominal Treasuries in real terms, whereas I can feel secure that I would only be losing a little bit with TIPS, and I would know how much that would be when I invested. (Of course that is assuming I am investing money that I plan to hold to maturity).

So why would I (or most retirees) want to buy nominal Treasuries at all rather than 100% TIPS? Am I missing some crucial point here?
If you want the lowest risk asset to meet real liabilities in the future, then TIPS are it. Ditto for nominal Treasuries and nominal liabilities.

One reason to own nominal Treasuries is that historically they have been a better diversifier for stocks in certain types of stock market downturns, such as in late 2008, and the longer the term, the better. This may or may not be the case in this stock downturn, with long-term Treasuries down more than 20%.

In my case, I am not looking at fixed income solely as a risk-free asset. What I'm doing now with Treasuries is more of an experiment so far, as they make up a small portion of my portfolio at this point. I am mostly buying when yields are higher than when I last bought. As has been pointed out, brokered CDs are looking more attractive at maturities of 2 years and beyond if you plan to hold to maturity, so I probably would target those instead of Treasuries. Personally, I probably wouldn't go beyond 2-year maturity for brokered CDs, just like nominal Treasuries.

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Re: Trading Treasuries (nominal and TIPS)

Post by Blues »

I'm sticking with mostly two year maturities as well, (Treasuries and brokered CDs). I don't want to go too far out on maturity dates because the future is cloudy regarding yields, and besides, I'm approaching 70, so shorter terms seem to make more sense.

I just can't seem to get past a stubborn disinclination to invest in TIPS...but that's on me and nobody else's fault.
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Re: Trading Treasuries (nominal and TIPS)

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protagonist wrote: Thu May 26, 2022 10:36 am I agree that buying something with a guaranteed loss in real terms is a hard pill to swallow. But a 5 year CD at 3.3% is guaranteed to be losing about 5% in real terms right now, and you are locked in for 5 years (without paying a penalty).
I don't think we know what we are losing in real terms on nominal investments. I think you are thinking about the year over year (YoY) inflation of 8.2%, but that's the past, not the present, and certainly not the future.

The monthly increase in seasonally-adjusted CPIAUC for April was 0.33%, which was much less than the 1.24% for March or the 0.8% for February. I have no idea what it will be for May, but April was certainly a deceleration from previous months.

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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

jeffyscott wrote: Thu May 26, 2022 10:50 am On what basis are you able to determine the future real return of a CD bought today? The expected real return is positive, if the BEI vs a nominal Treasury is assumed to reflect expected inflation.
I agree. Using yesterday's constant maturity Treasury (CMT) numbers, 5-year Treasury rate was 2.71% and Treasury real rate was -0.17%, for a BEI of 2.88%. A 5-year CD rate of 3.2% (what I see now at Fidelity for non-callable new issue) adds 49 basis points to the BEI. If we take the expected real return of the 5y nominal Treasury to be same as the 5y real rate, -0.17%, the CD has an expected real return of 0.32% (= -0.17% + 0.49%)
jeffyscott wrote: Thu May 26, 2022 10:50 am And I know that's not an exact relationship, there's seasonality and the known, but not yet applied, inflation index ratios to consider. And also investor preferences for liquidity and inflation insurance can be factors.
We can evaluate the first two items with pretty good certainty, and there are models that can be used to estimate liquidity and unexpected inflation premiums. These are good things to understand if looking at tradeoffs between nominals and TIPS.

Seasonality
-------------

There are other threads with long discussions about TIPS seasonality, so I don't want to get too deep into it here, but the bottom line is that shorter-term TIPS yields are affected by seasonal factors, and there are methods to calculate seasonally-adjusted yields, which I believe are more relevant in evaluating shorter-term TIPS. Forum member #Cruncher developed one such method, which I used to use, but another forum member found a paper published by Paul Canty that presents a simpler method, which is what I now use.

The Canty approach is to calculate a seasonally adjusted price by multiplying the quoted price by a factor that is the seasonal adjustment factor for the month/day at settlement by the seasonal factor for the month/day of maturity, then calculate the yield using that price (I use the YIELD function in Google Sheets). We can discuss this further if there is interest, and if you can't make sense of this on your own.

Here is a chart of ask quote yields from Fidelity yesterday and the corresponding Canty seasonally-adjusted (SA) yields:

Image

We see that the biggest delta is for the 1.14-year TIPS (maturing 7/15/2023), for which the ask yield is -2.73% and the SA yield is -2.51%, so more than 20 basis points higher. I would make my purchase decision using the SA yield.

Known inflation factor
---------------------------
I use a calculation shared by #Cruncher in this forum that incorporates the latest known reference CPI to calculate a more accurate BEI. Here is a chart of this BEI compared to the standard BEI (nominal minus real yield):

Image

We can also use seasonally adjusted TIPS yields to calculate seasonally-adjusted BEI:

Image

Note that using the SA TIPS yields smooths out the BEI, as expected.

Liquidity and unexpected inflation factors
----------------------------------------------------

Regarding liquidity and inflation risk factors, I'll just say that there is a model that uses these factors and the nominal and TIPS yields to end up with a 5-year expected inflation value of 2.21% for April 29, 2022, so much lower than the April 29 CMT BEI of 3.30%.

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Re: Trading Treasuries (nominal and TIPS)

Post by Electron »

Please share your experience in trading Treasuries, or ask any questions you have about it.
I'm also new to buying Treasuries or any individual fixed income investment. Since February I have been buying T-bills at auction every week at Vanguard brokerage. I also purchased a two year Treasury note.

Buying at auction was much simpler than expected. I then looked into buying on the secondary market and learned how to use the search tool provided. There were more steps than I initially expected before getting to the submit button. I recently bought two Treasury notes maturing later this year. One was purchased to see how the overall process works and also have a coupon paid at the end of the month.

I hadn't even noticed the simplified interface that Kevin has mentioned. After seeing how that method works I agree that it is a fast and easy way to purchase Treasury securities.

In thinking about the tax impact, I was surprised at the number of different fixed income related items reported on Form 1099-INT. There are entries for interest, market discount, bond premium, and accrued interest paid. Form 1099-B includes accrued market discount which may come into play when selling a security before maturity. It looks like the brokerage firm calculates the amount of any capital gain or loss in addition to interest income.

The Vanguard platform doesn't appear to have the capability to show coupon interest that has accrued to the current date. I did find one method that requires going part way through a sell transaction. The final screen before you would submit the order does show accrued interest. I canceled the transaction at that point.
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Re: Trading Treasuries (nominal and TIPS)

Post by protagonist »

Kevin M wrote: Thu May 26, 2022 11:26 am
I don't think we know what we are losing in real terms on nominal investments. I think you are thinking about the year over year (YoY) inflation of 8.2%, but that's the past, not the present, and certainly not the future.


Kevin
Yes, I agree, but that is all we know about. So my assumption is that it can go either up or down, anybody's guess is as good as my own, so we should use the current number. You are right in correcting me that it is the past, not the present (my error), but it is the closest we know, and it is a long shot from the nominal Treasury or best CD rate.

If a TIPS maturing in 3 yrs. is trading at approx. -0.7% and I understand TIPS correctly (which maybe I don't...I haven't bought any in a very long time) , that is a current nominal yield of approx. 7.5%, right? Big if, but still a huge gap over the 5 yr CD or nominal Treasury yield, and inflation could go either way.
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Re: Trading Treasuries (nominal and TIPS)

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Kevin M wrote: Wed May 25, 2022 4:32 pm If a brokered CD provides a significant yield advantage, I would consider going for it, but only if I were certain that I'd hold to maturity, and if it is not callable. Brokered CDs have a much larger bid/ask spread than Treasuries, so can lose 1% or more if you sell before maturity.
I just looked, and see only 2 CDs at Fidelity on the secondary market with maturity between 04/2024 and 06/2024 (so about two years) and a yield of > 2.9%; my last 2-year Treasury purchase yield was 2.72%, so I'm looking for about 20 basis points more than that. One of them only has 2 available, so of no interest. The other one has 270, with min qty 10, so I look at that. The yield is 2.9% before commission, but only 2.69% after the $10 commission. I go through the buy screens till I get to the Preview Order screen to see the net yield. Since this is a lower yield than my last Treasury purchase, I'll pass. Also, this CD is callable.

I see new issue non-callable 2-year CDs at 2.85%, which doesn't quite meet my 20 bps higher than last purchase criterion, although it is about 40 basis points higher than the current 2y Treasury yield of about 2.45%, so is a good deal for someone who wants to buy at today's yields.

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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

protagonist wrote: Thu May 26, 2022 2:15 pm
Kevin M wrote: Thu May 26, 2022 11:26 am
I don't think we know what we are losing in real terms on nominal investments. I think you are thinking about the year over year (YoY) inflation of 8.2%, but that's the past, not the present, and certainly not the future.

Kevin
Yes, I agree, but that is all we know about. So my assumption is that it can go either up or down, anybody's guess is as good as my own, so we should use the current number. You are right in correcting me that it is the past, not the present (my error), but it is the closest we know, and it is a long shot from 2.7% (matching inflation with nominal T's ) or 3.3% (matching inflation with the best 5 year CD). It would take a lot of change in the right direction to get down to that level in the next year or so.
But the YoY inflation is not the most current number we have. That would be the seasonally-adjusted month over month inflation for April. As I noted, that was 0.33%, which is 4.06% annualized. If you want to use the most current number, that would be it. So it wouldn't take nearly as much change in the direction of March to April to get down to 3% or so. Of course May could swing higher again, but that's the unknown future.

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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Electron wrote: Thu May 26, 2022 1:52 pm
Please share your experience in trading Treasuries, or ask any questions you have about it.
I'm also new to buying Treasuries or any individual fixed income investment. Since February I have been buying T-bills at auction every week at Vanguard brokerage. I also purchased a two year Treasury note.

<snip>

I hadn't even noticed the simplified interface that Kevin has mentioned. After seeing how that method works I agree that it is a fast and easy way to purchase Treasury securities.
Right, I plan on going over the Vanguard interfaces, unless someone else gets to it first.
Electron wrote: Thu May 26, 2022 1:52 pm The Vanguard platform doesn't appear to have the capability to show coupon interest that has accrued to the current date. I did find one method that requires going part way through a sell transaction. The final screen before you would submit the order does show accrued interest. I canceled the transaction at that point.
The simplified interface shows accrued interest on the order preview screen. The original interface shows accrued interest on the Buy order screen, after you press CALCULATE a couple of times. You can also calculate accrued interest for nominal Treasuries by subtracting the principal amount from the total amount.

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Re: Trading Treasuries (nominal and TIPS)

Post by protagonist »

Kevin M wrote: Thu May 26, 2022 2:23 pm
protagonist wrote: Thu May 26, 2022 2:15 pm
Kevin M wrote: Thu May 26, 2022 11:26 am
I don't think we know what we are losing in real terms on nominal investments. I think you are thinking about the year over year (YoY) inflation of 8.2%, but that's the past, not the present, and certainly not the future.

Kevin
Yes, I agree, but that is all we know about. So my assumption is that it can go either up or down, anybody's guess is as good as my own, so we should use the current number. You are right in correcting me that it is the past, not the present (my error), but it is the closest we know, and it is a long shot from 2.7% (matching inflation with nominal T's ) or 3.3% (matching inflation with the best 5 year CD). It would take a lot of change in the right direction to get down to that level in the next year or so.
But the YoY inflation is not the most current number we have. That would be the seasonally-adjusted month over month inflation for April. As I noted, that was 0.33%, which is 4.06% annualized. If you want to use the most current number, that would be it. So it wouldn't take nearly as much change in the direction of March to April to get down to 3% or so. Of course May could swing higher again, but that's the unknown future.

Kevin
Ah...thanks for the clarification. That would explain my confusion. So if the MoM value is 0.33% (4.06 annualized), does that mean that if a TIPS maturing in 3 years with a -0.7 real yield is purchased today, it would currently only be getting 4.06-0.7= 3.36% annualized nominal yield? In other words, the current yield is related to the MoM, not the YoY inflation rate? If so I probably knew that at one time but forgot.
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

Kevin M wrote: Thu May 26, 2022 2:17 pm I just looked, and see only 2 CDs at Fidelity on the secondary market with maturity between 04/2024 and 06/2024 (so about two years) and a yield of > 2.9%; my last 2-year Treasury purchase yield was 2.72%, so I'm looking for about 20 basis points more than that.
My last 2-year Treasury purchased at auctioned 2 days ago is showing now after close of business:

Quote Details Bid Ask
Price 100.039 100.043
Current Yield 2.499% 2.499%
Yield To Maturity 2.480% 2.478%

Am I missing something here? Are we just nitpicking? Is this just the market price change?
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Doc wrote: Thu May 26, 2022 3:27 pm
Kevin M wrote: Thu May 26, 2022 2:17 pm I just looked, and see only 2 CDs at Fidelity on the secondary market with maturity between 04/2024 and 06/2024 (so about two years) and a yield of > 2.9%; my last 2-year Treasury purchase yield was 2.72%, so I'm looking for about 20 basis points more than that.
My last 2-year Treasury purchased at auctioned 2 days ago is showing now after close of business:

Quote Details Bid Ask
Price 100.039 100.043
Current Yield 2.499% 2.499%
Yield To Maturity 2.480% 2.478%

Am I missing something here? Are we just nitpicking? Is this just the market price change?
Right, my last 2-year purchase was on 4/25 when the 2y yield was higher. This is shown in the spreadsheet screenshots in the OP.

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Re: Trading Treasuries (nominal and TIPS)

Post by Electron »

Kevin M wrote: Thu May 26, 2022 2:36 pmThe simplified interface shows accrued interest on the order preview screen. The original interface shows accrued interest on the Buy order screen, after you press CALCULATE a couple of times. You can also calculate accrued interest for nominal Treasuries by subtracting the principal amount from the total amount.
I was actually talking about the accrued interest in dollars that I have earned on any of my Treasury note holdings. That would be comparable to the accrued dividends that can be displayed for Vanguard bond funds using the "balances by date" tab. The only method I found was going part way through an actual sell transaction.

I'll take another look at the accrued interest when buying next time I am logged in. The amount was made clear on the two secondary market purchases that I completed earlier.
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Re: Trading Treasuries (nominal and TIPS)

Post by VictoriaF »

Kevin,

Thank you for starting this thread and for all your other threads and messages.

I have just started buying T-Bills at Treasury auctions using my Vanguard brokerage account. As you say, Vanguard does not have an option to roll maturing T-Bills into new ones. Does it mean that I'll always be missing a week of investing?

For example, I have 13-week T-bills starting on Thursday, May 12th, and maturing on Thursday, August 18th. To get 13-week T-bills starting on Thursday, August 18th, I'd have to order them at Vanguard on Sunday, August 14th. However, on August 14th, I would not have the funds available yet.

I understand your points about using Fidelity and about buying on the secondary market. But is there a solution for buying at auctions via Vanguard, without breaks?

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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

protagonist wrote: Thu May 26, 2022 2:39 pm
Kevin M wrote: Thu May 26, 2022 2:23 pm
protagonist wrote: Thu May 26, 2022 2:15 pm
Kevin M wrote: Thu May 26, 2022 11:26 am I don't think we know what we are losing in real terms on nominal investments. I think you are thinking about the year over year (YoY) inflation of 8.2%, but that's the past, not the present, and certainly not the future.

Kevin
Yes, I agree, but that is all we know about. So my assumption is that it can go either up or down, anybody's guess is as good as my own, so we should use the current number. You are right in correcting me that it is the past, not the present (my error), but it is the closest we know, and it is a long shot from 2.7% (matching inflation with nominal T's ) or 3.3% (matching inflation with the best 5 year CD). It would take a lot of change in the right direction to get down to that level in the next year or so.
But the YoY inflation is not the most current number we have. That would be the seasonally-adjusted month over month inflation for April. As I noted, that was 0.33%, which is 4.06% annualized. If you want to use the most current number, that would be it. So it wouldn't take nearly as much change in the direction of March to April to get down to 3% or so. Of course May could swing higher again, but that's the unknown future.

Kevin
Ah...thanks for the clarification. That would explain my confusion. So if the MoM value is 0.33% (4.06 annualized), does that mean that if a TIPS maturing in 3 years with a -0.7 real yield is purchased today, it would currently only be getting 4.06-0.7= 3.36% annualized nominal yield? In other words, the current yield is related to the MoM, not the YoY inflation rate? If so I probably knew that at one time but forgot.
I don't know that we can ever say what we currently are getting in nominal terms, but let's review what we do know about the inflation adjustment for TIPS.

The CPIAUCNS (non-seasonally adjusted) for April set the reference CPI for July 1, so we know the inflation index ratios (IRs) from now through July 1, with the June values based on linear interpolation between the June 1 and July 1 reference CPIs. The reference CPI for each date divided by the reference CPI on the TIPS dated date give us the IR, which is multiplied by the unadjusted price to give us the inflation-adjusted price. So, we already know the inflation adjustments we "are getting" now, and we even know them through July 1. For a more detailed explanation, with examples, see this webpage: http://eyebonds.info/tips/help.html.

I don't know if this helps with your question at all, but it's an important thing to understand about TIPS.

We don't know what we'll earn in nominal terms for a TIPS over the next month, even though we know the inflation adjustments, since we don't know how the TIPS unadjusted price will change over the next month, and we need to know that to calculate the adjusted price. There are no TIPS maturing in June, but there is one maturing on 7/15/2022. Once May CPI is released on 6/10/2022, we will know the nominal return for the 7/15/2022 TIPS from 6/10 to 7/15, since we know the unadjusted price on 7/15 will be 100, so we can multiply 100 by the 7/15 IR to get the adjusted price for 7/15.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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jeffyscott
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

VictoriaF wrote: Thu May 26, 2022 4:05 pm For example, I have 13-week T-bills starting on Thursday, May 12th, and maturing on Thursday, August 18th. To get 13-week T-bills starting on Thursday, August 18th, I'd have to order them at Vanguard on Sunday, August 14th. However, on August 14th, I would not have the funds available yet.
It looks like the new bill would be auctioned on Monday, August 22, 2022
There's a 13-Week Bill, announced Thursday, August 18, 2022
https://home.treasury.gov/system/files/ ... hedule.pdf

Also, I believe an order can be submitted as late as the morning of the auction.
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Re: Trading Treasuries (nominal and TIPS)

Post by VictoriaF »

jeffyscott wrote: Thu May 26, 2022 4:16 pm
VictoriaF wrote: Thu May 26, 2022 4:05 pm For example, I have 13-week T-bills starting on Thursday, May 12th, and maturing on Thursday, August 18th. To get 13-week T-bills starting on Thursday, August 18th, I'd have to order them at Vanguard on Sunday, August 14th. However, on August 14th, I would not have the funds available yet.
It looks like the new bill would be auctioned on Monday, August 22, 2022
There's a 13-Week Bill, announced Thursday, August 18, 2022
https://home.treasury.gov/system/files/ ... hedule.pdf

Also, I believe an order can be submitted as late as the morning of the auction.
Right. I'll collect cash on Thursday, August 18th, and place an order on Sunday, August 21st. My T-Bills will start earning interest on Thursday, August 25th, and I'll have a break in earnings for a week between August 18th and August 25th.

You are right that I can place an order before 9 AM on the day of the auction, but that does not help. I can't place an order on Monday, August 15th, if I won't have the money until Thursday, August 18th. And placing an order on Monday, August 22nd, is not any better than on Sunday August 21st.

Victoria
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

VictoriaF wrote: Thu May 26, 2022 4:37 pm
jeffyscott wrote: Thu May 26, 2022 4:16 pm
VictoriaF wrote: Thu May 26, 2022 4:05 pm For example, I have 13-week T-bills starting on Thursday, May 12th, and maturing on Thursday, August 18th. To get 13-week T-bills starting on Thursday, August 18th, I'd have to order them at Vanguard on Sunday, August 14th. However, on August 14th, I would not have the funds available yet.
It looks like the new bill would be auctioned on Monday, August 22, 2022
There's a 13-Week Bill, announced Thursday, August 18, 2022
https://home.treasury.gov/system/files/ ... hedule.pdf

Also, I believe an order can be submitted as late as the morning of the auction.
Right. I'll collect cash on Thursday, August 18th, and place an order on Sunday, August 21st. My T-Bills will start earning interest on Thursday, August 25th, and I'll have a break in earnings for a week between August 18th and August 25th.

You are right that I can place an order before 9 AM on the day of the auction, but that does not help. I can't place an order on Monday, August 15th, if I won't have the money until Thursday, August 18th. And placing an order on Monday, August 22nd, is not any better than on Sunday August 21st.

Victoria
Sorry, I see you were talking about whether you can get the prior one: 13-Week BILL, announced Thursday, August 11, 2022, auctioned Monday, August 15, 2022, and settles Thursday, August 18, 2022
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Re: Trading Treasuries (nominal and TIPS)

Post by drob »

VictoriaF wrote: Thu May 26, 2022 4:37 pm
jeffyscott wrote: Thu May 26, 2022 4:16 pm
VictoriaF wrote: Thu May 26, 2022 4:05 pm For example, I have 13-week T-bills starting on Thursday, May 12th, and maturing on Thursday, August 18th. To get 13-week T-bills starting on Thursday, August 18th, I'd have to order them at Vanguard on Sunday, August 14th. However, on August 14th, I would not have the funds available yet.
It looks like the new bill would be auctioned on Monday, August 22, 2022
There's a 13-Week Bill, announced Thursday, August 18, 2022
https://home.treasury.gov/system/files/ ... hedule.pdf

Also, I believe an order can be submitted as late as the morning of the auction.
Right. I'll collect cash on Thursday, August 18th, and place an order on Sunday, August 21st. My T-Bills will start earning interest on Thursday, August 25th, and I'll have a break in earnings for a week between August 18th and August 25th.

You are right that I can place an order before 9 AM on the day of the auction, but that does not help. I can't place an order on Monday, August 15th, if I won't have the money until Thursday, August 18th. And placing an order on Monday, August 22nd, is not any better than on Sunday August 21st.

Victoria
I normally keep enough funds in a short term treasury fund to buy the replacement bill before the original bill settles but a couple times at Fidelity I've called the bond desk and they have executed the replacement order for me (without fee) before the cash is available since they an see that there is a maturing bill that will settle in time for the purchase settlement.
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