1-year Treasury Bill auction

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Kevin M
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Re: 1-year Treasury Bill auction

Post by Kevin M » Thu Jul 19, 2018 2:07 pm

The 2-year Treasury note auction is open. Auction closes 7/24 and settles 7/31. Vanguard shows indicative yield at 2.591%, and Fidelity shows estimated yield at 2.590%. For comparison, Treasury.gov CMT 2-year yield from yesterday was 2.60%.

Using 2.590%, TEY for me would be 2.909%. APY is 2.607%, which would be TEY for me of 2.928%. So this is a yield premium of about 20-23 bps/year, depending on whether comparing to most recent 1-year Treasury auction or savings account at 2.50%, and whether using bond-equivalent yield (BEY) or APY.

Comparing to Andrews FCU 9-month CD at 2.75%, the 2-year is only maximum of about 17 basis points higher, which is only about 7.8 bps/year of maturity.

Kevin
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Kevin M
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Re: 1-year Treasury Bill auction

Post by Kevin M » Tue Sep 11, 2018 5:06 pm

The 1-year (52-week) Treasury Bill price at auction today was 97.507611, with investment rate of 2.547%, which for me is TEY of 2.861% and TEY-APY of 2.879%. This is about 38 basis points above my savings account at 2.50%, so quite a nice yield premium for extending maturity by one year.

Although I didn't buy any for myself (kind of wish I had), I bought some in several accounts for which I'm an agent. Bought 10 in one account for 9,750.76, and 20 in another account for 19,501.52.

With the 1-year at 2.55%, 2-year at 2.76%, and 3-year at 2.83%, one might wonder why the SEC yield of Short-Term Treasury Index Admiral is only 2.57%, since it holds almost entirely notes in the 1-3 year maturity range, with an average effective maturity of two years. Since SEC yield is a 30-day average, I calculated the average of the 2-year since 8/13, and it's 2.65%. Subtracting the ER of 0.07% gives 2.58%, so almost equal to the SEC yield.

So I would imagine that the actual fund yield now is close to 2.7%.

Kevin
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Kevin M
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Re: 1-year Treasury Bill auction

Post by Kevin M » Tue Oct 09, 2018 7:31 pm

The 1-year (52-week) Treasury Bill, price at auction today was 97.391333, with investment rate of 2.668%, which for me is TEY of 2.996%% and TEY-APY of 3.016%. This is about 52 basis points above my savings account at 2.50%, so a very nice yield premium for extending maturity by one year. This bill matures 10/10/2019.

Shortly after the auction close, on the secondary market at Schwab, I bought some of the 1.75% Treasury maturing 9/30/2019 for a yield of 2.680%, so a bit higher yield than the 1-year Treasury at auction, with lower duration (shorter maturity + higher coupon rate). Later in the day the yield on this note dropped to 2.6633%.

Kevin
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Stormbringer
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Re: 1-year Treasury Bill auction

Post by Stormbringer » Tue Oct 09, 2018 8:29 pm

Kevin M wrote:
Tue Oct 09, 2018 7:31 pm
The 1-year (52-week) Treasury Bill, price at auction today was 97.391333, with investment rate of 2.668%, which for me is TEY of 2.996%% and TEY-APY of 3.016%. This is about 52 basis points above my savings account at 2.50%, so a very nice yield premium for extending maturity by one year. This bill matures 10/10/2019.

Shortly after the auction close, on the secondary market at Schwab, I bought some of the 1.75% Treasury maturing 9/30/2019 for a yield of 2.680%, so a bit higher yield than the 1-year Treasury at auction, with lower duration (shorter maturity + higher coupon rate). Later in the day the yield on this note dropped to 2.6633%.

Kevin
Does it pay to sort of roll your own Money Market account with short term treasuries? I've got $150K sitting around in a Capital One 360 @ 1.85% and wondering if I can do better.
"Compound interest is the most powerful force in the universe." - Albert Einstein

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triceratop
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Re: 1-year Treasury Bill auction

Post by triceratop » Tue Oct 09, 2018 9:34 pm

Stormbringer wrote:
Tue Oct 09, 2018 8:29 pm
Kevin M wrote:
Tue Oct 09, 2018 7:31 pm
The 1-year (52-week) Treasury Bill, price at auction today was 97.391333, with investment rate of 2.668%, which for me is TEY of 2.996%% and TEY-APY of 3.016%. This is about 52 basis points above my savings account at 2.50%, so a very nice yield premium for extending maturity by one year. This bill matures 10/10/2019.

Shortly after the auction close, on the secondary market at Schwab, I bought some of the 1.75% Treasury maturing 9/30/2019 for a yield of 2.680%, so a bit higher yield than the 1-year Treasury at auction, with lower duration (shorter maturity + higher coupon rate). Later in the day the yield on this note dropped to 2.6633%.

Kevin
Does it pay to sort of roll your own Money Market account with short term treasuries? I've got $150K sitting around in a Capital One 360 @ 1.85% and wondering if I can do better.
You could. It would save you 9 basis points.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

mervinj7
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Re: 1-year Treasury Bill auction

Post by mervinj7 » Wed Oct 10, 2018 10:35 am

Stormbringer wrote:
Tue Oct 09, 2018 8:29 pm
Does it pay to sort of roll your own Money Market account with short term treasuries? I've got $150K sitting around in a Capital One 360 @ 1.85% and wondering if I can do better.
We were in a similar situation with our EF. We decided to keep 3 months worth of expenses in the Cap One 360 MM fund. For the rest we are building up short term Treasury Ladders (13 weeks T-bills). Once they are setup, they automatically "auto-roll." For certain large, known expenses like our semi-annual Property Tax Bill in April and December, we just pick a T-bill with the appropriate maturity date (e.g. 26 weeks and 52 weeks in this case) and turn-off autoroll for those individual securities.

https://www.fidelity.com/fixed-income-b ... ll-program

However, like triceratop pointed out, it will only save you very, very little to do it yourself. I just like the fun of buying individual treasuries that are tailored towards our cash flow needs.
triceratop wrote:
Tue Oct 09, 2018 9:34 pm
You could. It would save you 9 basis points.

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Kevin M
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Re: 1-year Treasury Bill auction

Post by Kevin M » Wed Oct 10, 2018 7:14 pm

Stormbringer wrote:
Tue Oct 09, 2018 8:29 pm
Does it pay to sort of roll your own Money Market account with short term treasuries? I've got $150K sitting around in a Capital One 360 @ 1.85% and wondering if I can do better.
You can earn more than 1.85% in a money market fund. VG Prime MM SEC yield is 2.16%.

If you pay state income tax, the Treasury MM fund might have a higher taxable-equivalent yield (TEY). For me, VG Treasury MM fund with SEC yield at 2.03% has a TEY of 2.28%, and it's safer than Prime. Minimum initial investment is $50K, which you have, but once the fund is open, balance can drop below $50K and you can keep it open.

You can earn a little bit more with short term Treasuries, but of course the liquidity isn't quite as good as with a MM fund.

Kevin
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Kevin M
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Re: 1-year Treasury Bill auction

Post by Kevin M » Wed Oct 10, 2018 7:37 pm

Does it pay to sort of roll your own Money Market account with short term treasuries? I've got $150K sitting around in a Capital One 360 @ 1.85% and wondering if I can do better.
triceratop wrote:
Tue Oct 09, 2018 9:34 pm
You could. It would save you 9 basis points.
It depends on what you mean by "short term Treasuries". Compared to Treasury MM fund SEC yield of 2.03%, here are yields I saw today at Schwab (better than Vanguard or Fidelity to buy smaller quantities of Treasuries):

2.15% - 1-month
2.27% - 3-month
2.45% - 6-month (I bought some today for myself, and for two others for which I have POA)

The average maturity of the Treasuries in the MM fund is a little less than 60 days, but since the share price is maintained at $1, it might as well be 0 days; i.e., there is no term risk. A rolling ladder of Treasuries with an average maturity of 60 days will fluctuate some in value (a little term risk), and there is a bid/ask spread cost to sell. As long as you mostly can use maturing bills for expenses, you can earn more than 9 basis points more than the MM fund with a little additional term risk.

Kevin
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