T-Bills Buying

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mvftw
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T-Bills Buying

Post by mvftw »

I'm looking to start a T-Bills Ladder in Jan. 2023. I'm currently invested in I-Bonds and do have a TreasuryDirect account. I know with I-Bonds you can buy at the end of the month a get interest from the start of the month.
Is there a better time of day to buy T-Bills? 26 week (weekly), is it better on Friday or Monday or morning, afternoon. Same with 52 week (monthly). Is there a better time to buy-in? Looking for a rule-of-thumb...Thx
MGBMartin
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Re: T-Bills Buying

Post by MGBMartin »

There is no real better time to buy T-Bills on TD as you are buying at auction so you will get the same price and yield no matter what day or time you place your orders.

Obviously you have to order during the auction window or whatever TD permits.
Start here as there are some good links regarding how the auction works as well as schedules and timing.
https://www.treasurydirect.gov/auctions ... ions-work/

And here’s a good article on buying T-Bills but it is primarily focused on buying via a broker.
https://thefinancebuff.com/treasury-bil ... arket.html
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Alkali Ike
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Re: T-Bills Buying

Post by Alkali Ike »

I only purchase non-competitive bills, so others may be more helpful regarding the secondary market. You can bid anytime between the Thursday when the issue is announced and prior to the Monday morning auction. Don't over analyze this. Trying to time your entry point is futile. You will get the same rate as the big boys are getting.

I find the best current updated rates at : https://www.cnbc.com/us-treasurys/

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Jerry55
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Re: T-Bills Buying

Post by Jerry55 »

Good points above...I had a legacy account and had to update it when I began purchasing 6 month T-Bills back in May 2022.
I stopped purchase of them over 10 yrs ago due to interest being rather LOW.
Long story short, I buy one every month for 6 months and as long as rates are good (currently ~ 4%) and free from state taxes, I set each one up to reinvest once, and if rates are still good, I continue to reinvest up to 4 times max....If rates go down, I'll rethink it. Online accounts force me to pay IL state tax of 5% or so.
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erishera
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Re: T-Bills Buying

Post by erishera »

The Finance Buff has an excellent set of instructions for T-bills, I-bonds, etc. Here is a link: https://thefinancebuff.com/treasury-bil ... arket.html
If you come out of this article you can see others that are older but serve different points of interest.
joelly
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Re: T-Bills Buying

Post by joelly »

MGBMartin wrote: Wed Nov 23, 2022 12:00 pm There is no real better time to buy T-Bills on TD as you are buying at auction so you will get the same price and yield no matter what day or time you place your orders.

Obviously you have to order during the auction window or whatever TD permits.
Start here as there are some good links regarding how the auction works as well as schedules and timing.
https://www.treasurydirect.gov/auctions ... ions-work/

And here’s a good article on buying T-Bills but it is primarily focused on buying via a broker.
https://thefinancebuff.com/treasury-bil ... arket.html
Hi!

I would need clarification on the auction window. What is that?

When I buy I-bonds, I buy from TD but there’s no auction or anything. Have I been buying the wrong one?

Please help.

Thank you!
lakpr
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Re: T-Bills Buying

Post by lakpr »

<delete>
Last edited by lakpr on Wed Nov 23, 2022 5:14 pm, edited 1 time in total.
MGBMartin
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Re: T-Bills Buying

Post by MGBMartin »

joelly wrote: Wed Nov 23, 2022 1:50 pm
MGBMartin wrote: Wed Nov 23, 2022 12:00 pm There is no real better time to buy T-Bills on TD as you are buying at auction so you will get the same price and yield no matter what day or time you place your orders.

Obviously you have to order during the auction window or whatever TD permits.
Start here as there are some good links regarding how the auction works as well as schedules and timing.
https://www.treasurydirect.gov/auctions ... ions-work/

And here’s a good article on buying T-Bills but it is primarily focused on buying via a broker.
https://thefinancebuff.com/treasury-bil ... arket.html
Hi!

I would need clarification on the auction window. What is that?

When I buy I-bonds, I buy from TD but there’s no auction or anything. Have I been buying the wrong one?

Please help.

Thank you!
The auction window is explained in the 2 links I included.
The second link probably has a clearer explanation.

Basically the auction window begins the afternoon of the Announcement Date and typically ends the morning of the Auction Date.
For 13 and 26 week t-bills that would be Thursday for the Announcement Date and Monday for the Auction Date IIRC. Those days may move around due to holidays like they did this week. The latest 13 and 26 week offering starts today, usually Thursday as tomorrow is a holiday.
4, 8 and 17 week usually have a Tuesday- Thursday schedule.
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Topic Author
mvftw
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Re: T-Bills Buying

Post by mvftw »

As from a reply from above, is buying non-competitive bills the way to go? It seems easier according to the links...
MGBMartin
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Re: T-Bills Buying

Post by MGBMartin »

mvftw wrote: Wed Nov 23, 2022 4:15 pm As from a reply from above, is buying non-competitive bills the way to go? It seems easier according to the links...
Easier than what?
If you mean easier than competitive bids then yes it is easier, competitive bids are usually more in the institutional realm.
If you mean easier than buying on the secondary market then yes also as buying on the secondary market is not difficult but a different way of thinking of how to buy and pricing.

Don’t overthink it.
If you want to buy T-Bills buy them at TD or your brokerage via the auction process. There is not going to be much difference in rates between auction and secondary buys.

This lady on YouTube has some really good videos on purchasing T-Bills via auction or secondary as well as other stuff.
https://www.youtube.com/@DiamondNestEgg
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MikeG62
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Re: T-Bills Buying

Post by MikeG62 »

mvftw wrote: Wed Nov 23, 2022 11:08 am I'm looking to start a T-Bills Ladder in Jan. 2023. I'm currently invested in I-Bonds and do have a TreasuryDirect account. I know with I-Bonds you can buy at the end of the month a get interest from the start of the month.
Is there a better time of day to buy T-Bills? 26 week (weekly), is it better on Friday or Monday or morning, afternoon. Same with 52 week (monthly). Is there a better time to buy-in? Looking for a rule-of-thumb...Thx
I much prefer buying in the secondary market. This way I can be opportunistic in what I am buying (purchasing when yields spike). FWIW, I've bought seven figures of Treasuries in the secondary market over the last several months. So, I am eating my own cooking so to speak.
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coachd50
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Re: T-Bills Buying

Post by coachd50 »

MikeG62 wrote: Thu Nov 24, 2022 7:32 am
mvftw wrote: Wed Nov 23, 2022 11:08 am I'm looking to start a T-Bills Ladder in Jan. 2023. I'm currently invested in I-Bonds and do have a TreasuryDirect account. I know with I-Bonds you can buy at the end of the month a get interest from the start of the month.
Is there a better time of day to buy T-Bills? 26 week (weekly), is it better on Friday or Monday or morning, afternoon. Same with 52 week (monthly). Is there a better time to buy-in? Looking for a rule-of-thumb...Thx
I much prefer buying in the secondary market. This way I can be opportunistic in what I am buying (purchasing when yields spike). FWIW, I've bought seven figures of Treasuries in the secondary market over the last several months. So, I am eating my own cooking so to speak.
But with the extremely liquid market, can one be "opportunistic" on the secondary market? The prices adjust based on the prevailing rates correct? So buying something that is priced low on the secondary market means foregoing buying a new issue with a higher coupon right? Conversely, buying something with a high coupon on the secondary market means paying more for it than if you were to buy a new issue.
Right?
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Re: T-Bills Buying

Post by MikeG62 »

coachd50 wrote: Thu Nov 24, 2022 12:19 pm
MikeG62 wrote: Thu Nov 24, 2022 7:32 am
mvftw wrote: Wed Nov 23, 2022 11:08 am I'm looking to start a T-Bills Ladder in Jan. 2023. I'm currently invested in I-Bonds and do have a TreasuryDirect account. I know with I-Bonds you can buy at the end of the month a get interest from the start of the month.
Is there a better time of day to buy T-Bills? 26 week (weekly), is it better on Friday or Monday or morning, afternoon. Same with 52 week (monthly). Is there a better time to buy-in? Looking for a rule-of-thumb...Thx
I much prefer buying in the secondary market. This way I can be opportunistic in what I am buying (purchasing when yields spike). FWIW, I've bought seven figures of Treasuries in the secondary market over the last several months. So, I am eating my own cooking so to speak.
But with the extremely liquid market, can one be "opportunistic" on the secondary market? The prices adjust based on the prevailing rates correct? So buying something that is priced low on the secondary market means foregoing buying a new issue with a higher coupon right? Conversely, buying something with a high coupon on the secondary market means paying more for it than if you were to buy a new issue.
Right?
By being opportunistic, I mean buying on a day when yields spike (or after several days when rates have moved upwards). Pricing on the secondary market and new issues is comparable on the day and at the time new issues price.

One problem with buying new issues is you can only buy when there is an auction. And when there is an auction might not be on a day or at a time when yields have popped.

I’ve bought both but much prefer to buy in the secondary market.

If I wanted to auto roll my Treasuries I might then prefer new issues. However, auto roll is not as important to me as buying opportunistically. I like more control over what is bought and when.
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coachd50
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Re: T-Bills Buying

Post by coachd50 »

MikeG62 wrote: Thu Nov 24, 2022 4:06 pm
coachd50 wrote: Thu Nov 24, 2022 12:19 pm
MikeG62 wrote: Thu Nov 24, 2022 7:32 am
mvftw wrote: Wed Nov 23, 2022 11:08 am I'm looking to start a T-Bills Ladder in Jan. 2023. I'm currently invested in I-Bonds and do have a TreasuryDirect account. I know with I-Bonds you can buy at the end of the month a get interest from the start of the month.
Is there a better time of day to buy T-Bills? 26 week (weekly), is it better on Friday or Monday or morning, afternoon. Same with 52 week (monthly). Is there a better time to buy-in? Looking for a rule-of-thumb...Thx
I much prefer buying in the secondary market. This way I can be opportunistic in what I am buying (purchasing when yields spike). FWIW, I've bought seven figures of Treasuries in the secondary market over the last several months. So, I am eating my own cooking so to speak.
But with the extremely liquid market, can one be "opportunistic" on the secondary market? The prices adjust based on the prevailing rates correct? So buying something that is priced low on the secondary market means foregoing buying a new issue with a higher coupon right? Conversely, buying something with a high coupon on the secondary market means paying more for it than if you were to buy a new issue.
Right?
By being opportunistic, I mean buying on a day when yields spike (or after several days when rates have moved upwards). Pricing on the secondary market and new issues is comparable on the day and at the time new issues price.

One problem with buying new issues is you can only buy when there is an auction. And when there is an auction might not be on a day or at a time when yields have popped.

I’ve bought both but much prefer to buy in the secondary market.

If I wanted to auto roll my Treasuries I might then prefer new issues. However, auto roll is not as important to me as buying opportunistically. I like more control over what is bought and when.
I still don't understand how you feel your timing benefits you with regards to holding bonds in a portfolio. Can you give a real world example with numbers? Is your strategy to buy AND SELL bonds--"day trading" so to speak in the bond market?

Edit-- Perhaps I am fundamentally misunderstanding the treasury bond market. As I understand it- right now if I had say $10,000 I wanted to use to purchase Treasury bills that matured on a certain date, I would get get "X". Whether that purchase was a new issue, or existing- because the current bills would be priced to match that new issue right?
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Kevin M
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Re: T-Bills Buying

Post by Kevin M »

^Here's an example. I bought the 4/15/2027 TIPS on secondary on 6/17/22 at a yield of 0.43%, then I bought more at auction on 6/24/22 (settle) at 0.27%. Of course it can go the other way too. This isn't a bill, but it doesn't matter to make the point.

Another benefit of secondary purchases is T+1 settlement, while at auction settlement usually is T+5 for 4-week and 8-week bills, T+3 for 13-week and 26-week bills, T+6 for 17-week bills, and T+2 for 52-week bills.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
coachd50
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Re: T-Bills Buying

Post by coachd50 »

Kevin M wrote: Thu Nov 24, 2022 5:03 pm ^Here's an example. I bought the 4/15/2027 TIPS on secondary on 6/17/22 at a yield of 0.43%, then I bought more at auction on 6/24/22 (settle) at 0.27%. Of course it can go the other way too. This isn't a bill, but it doesn't matter to make the point.

Another benefit of secondary purchases is T+1 settlement, while at auction settlement usually is T+5 for 4-week and 8-week bills, T+3 for 13-week and 26-week bills, T+6 for 17-week bills, and T+2 for 52-week bills.

Kevin
Yes, I get that- I suppose my question is what is the investor doing with the money in the mean time? If he/she is waiting for the "opportunistic time" to purchase- what are they doing with the funds they plan to use? Viewing things from a total asset approach.

I am not suggesting that purchasing on the secondary market is inferior. I was just a bit confused by the idea of "opportunistic" when it comes to buying these types of instruments. Essentially it would be treasury market timing correct?
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Kevin M
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Re: T-Bills Buying

Post by Kevin M »

coachd50 wrote: Thu Nov 24, 2022 4:39 pm Edit-- Perhaps I am fundamentally misunderstanding the treasury bond market. As I understand it- right now if I had say $10,000 I wanted to use to purchase Treasury bills that matured on a certain date, I would get get "X". Whether that purchase was a new issue, or existing- because the current bills would be priced to match that new issue right?
Well, right now you couldn't buy anything, because the bond market is closed. :oops: But, let's change "right now" to ASAP.

On 11/28 there is an auction for 13 and 26-week bills. On 11/29 there's an auction for a 52-week bill. Nov 30, 17-week. Dec 1, 4-week and 8-week, etc.

The secondary bond market is open tomorrow, 11/25, but it closes early at 2pm ET, so you could buy any available maturity tomorrow, with settlement the following Monday. There are about 580 Treasuries available on the secondary market, 47 of which are bills. With all of these choices, you can come close to any maturity date you want.

So you can more quickly build a ladder or buy maturities on the secondary market that won't be available at auction for awhile if ever.

One caveat is that you almost always get a better price/yield on secondary for larger quantities, like 100, compared to smaller quantities like 10. At auction, everyone gets the same price/yield, and there is no bid/ask spread.

Keeping in mind that many bills are reopenings, you may be able to buy the exact same bill on the secondary market on the day of the auction. From memory, the auction yield typically is a bit higher than what I see on the secondary the same day of the auction. It's easy enough to check on your own. Check the secondary market for the CUSIP just auctioned, and check the secondary price/yield compared to the auction price/yield.

I download Treasuries from Fidelity on Friday, 11/23. There were 4, 8 and 17-week auctions on 11/23.
  • The 4-week price and yield at auction were 99.691222 and 4.038% for CUSIP 912796ZA0; the best ask price and yield for this issue on secondary when I pulled the quotes were 99.663 and 3.86%.
  • The 8-week price and yield were 99.359111 and 4.204% for CUSIP 912796ZL6; the best price and yield for this issue on secondary when I pulled the quotes were 99.351 and 3.97%.
These aren't exact comparisons since settlement dates are different, and yield is calculated from settlement to maturity. Secondary purchase yesterday settles tomorrow, 11/25. The auctioned bills settle on 11/29, so four days later. Note that although the yields were higher at auction, the prices on secondary were lower, which relates to the differences in settlement dates.

The 17-week was not a reopening, so it is not available yet on secondary.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Kevin M
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Re: T-Bills Buying

Post by Kevin M »

coachd50 wrote: Thu Nov 24, 2022 5:12 pm Yes, I get that- I suppose my question is what is the investor doing with the money in the mean time? If he/she is waiting for the "opportunistic time" to purchase- what are they doing with the funds they plan to use? Viewing things from a total asset approach.

I am not suggesting that purchasing on the secondary market is inferior. I was just a bit confused by the idea of "opportunistic" when it comes to buying these types of instruments. Essentially it would be treasury market timing correct?
MikeG62 can answer for himself, but sure, it's market timing. Some of us are OK with that, even though it's not BH approved.

I think what Mike was talking about was buying on days that yields jump a lot, like 10 basis points or more. I like to buy on those days too, but I pretty much have been buying something, mostly TIPS, on most days lately. Taking the gradual approach, which I started back in April of this year, has paid off, since yields have risen a lot since then. Here are a few charts that show the yields of certain TIPS (blue curve) and my purchases (red dots):

Image

Image

(The red dot at the far right of each chart is the latest yield, whether or not I bought that day.

You can see that market timing paid off through about the end of September, but yields have been down and up since then.

I hold my cash that I'm gradually deploying into Treasuries (including TIPS) in a money market fund, like FZDXX at Fidelity, which currently has a 1-day yield of 3.81%, so not much less than the 3.9% or so for the 4-week bill bought on secondary yesterday. This is fine in an IRA, but in taxable the Treasury taxable-equivalent yield (TEY) is higher for me, with marginal tax rates of 22% and 9.3%. For example, 3.86% is 4.38% TEY for me, so in taxable I might hold some short-term Ts if I don't plan to use the cash in less than a month, or I'll use a Treasury MM fund if the yield is decent. The 7-day yield on VUSXX was 3.56%, which is 4.04% TEY for me.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
MikeG62
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Re: T-Bills Buying

Post by MikeG62 »

coachd50 wrote: Thu Nov 24, 2022 5:12 pm
Kevin M wrote: Thu Nov 24, 2022 5:03 pm ^Here's an example. I bought the 4/15/2027 TIPS on secondary on 6/17/22 at a yield of 0.43%, then I bought more at auction on 6/24/22 (settle) at 0.27%. Of course it can go the other way too. This isn't a bill, but it doesn't matter to make the point.

Another benefit of secondary purchases is T+1 settlement, while at auction settlement usually is T+5 for 4-week and 8-week bills, T+3 for 13-week and 26-week bills, T+6 for 17-week bills, and T+2 for 52-week bills.

Kevin
Yes, I get that- I suppose my question is what is the investor doing with the money in the mean time? If he/she is waiting for the "opportunistic time" to purchase- what are they doing with the funds they plan to use? Viewing things from a total asset approach.

I am not suggesting that purchasing on the secondary market is inferior. I was just a bit confused by the idea of "opportunistic" when it comes to buying these types of instruments. Essentially it would be treasury market timing correct?
Kevin is correct - it is a bit of market timing. However, this year (especially the last several months) has seen unprecedented volatility in Treasury yields - with yields on 1, 2, 3, 5 and 7 year Treasuries (those which I track every day) moving 10bps or more on a particular day not being uncommon. This has typically happened when one Fed official or anther suggests the Fed is no where near ending this rate increase cycle or when one Fed official hints that the Fed may want to slow things down and wait to see the lag affects of the unprecedented rate increases (four 75bp hikes in a row) that have already been done.

Here is some hard data.

In the month of Oct (20 trading days) here are the number of days where yields on these duration Treasuries moved by 10bps or more:

12-month Bills = 5 times or 25% of the trading days (with the largest one day move being 19bps)
2-year Notes = 7 times or 35% of the trading days (with the largest one day move being 17bps)
3-year Notes = 8 times or 40% of the trading days (with the largest one day moves being 17bps)
5-year Notes = 10 times or 50% of the trading days (with the largest one day move being 21bps)

Most of those large one day moves were up and not down in yields. And none of those days corresponded with a new issue Treasury note auction closing.

Here is another data point. On Nov 10th (the day the most recent CPI was released) the move in yields on each of the above term Treasuries were as follows:

12-month Bills = -16bps
2-year Notes = -27bps
3-year Notes = -32bps
5-year Notes = -32bps

Here are a few more examples.

The last 12-month Treasury auction was on 11/3/22 and the yield was 4.73%. On that same day, I bought a Treasury maturing on 10/31/23 (almost one year remaining) with a yield of 4.82%.

Also, the closing yield on the 12-month Treasury on 11/3 was 4.78%, on 11/7 was 4.80% and on 11/8 was 4.77%.

Being opportunistic means not being a slave to an exact term either. A remaining term of 11-13 months is close enough "to me" to be comparable to a 12-month.

Here is another example. A friend of mine (who I have helped buy some Treasury bonds) on 11/3/22 bought a note maturing in April 2024 with a yield of 4.86% and another note maturing in June of 2024 with a yield of 4.85%. Waiting for new auctions would have meant missing opportunities like these.

One more example. The last 5-year note was auctioned on 10/31/22 and the yield was 4.19%. On 11/1 the 5-year closed at 4.27%, on 11/2 it closed at 4.30% and on 11/3 it closed at 4.37%.

The big issue with new issue Treasury Note auctions (which I said above) is that you are buying on that one particular day for the month (well this applies to notes with maturities of 12-months or more). You get the yield on that day and only that day in the month - regardless of what the news happens to be. I'd rather scan that which is available on the secondary market (for various maturities) on a day when yields spike. I've shown you that in Oct this happened much more often than you'd think.

And lastly, like Kevin, most of my money awaiting deployment into Treasuries sits in either Fidelity's premium MMF (FZDXX) or Marcus (where I am earning a yield of 4.0% due to a referral bonus I am enjoying). Although to be honest, I haven't been letting cash sit for very long (days at most). I've been trying to get those funds into Treasuries ASAP (no knowing how long these attractive yields will last). This is largely funds coming from maturing CD's and called muni bonds. I fully accept that I won't get the top of the market (I am not that lucky). But I also believe that I will be very happy with the Treasuries I bought this year if not now, then by the end of Q1 or come the summer of 2023.

I hope this answers your questions.
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coachd50
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Re: T-Bills Buying

Post by coachd50 »

MikeG62 wrote: Fri Nov 25, 2022 8:03 am
coachd50 wrote: Thu Nov 24, 2022 5:12 pm
Kevin M wrote: Thu Nov 24, 2022 5:03 pm ^Here's an example. I bought the 4/15/2027 TIPS on secondary on 6/17/22 at a yield of 0.43%, then I bought more at auction on 6/24/22 (settle) at 0.27%. Of course it can go the other way too. This isn't a bill, but it doesn't matter to make the point.

Another benefit of secondary purchases is T+1 settlement, while at auction settlement usually is T+5 for 4-week and 8-week bills, T+3 for 13-week and 26-week bills, T+6 for 17-week bills, and T+2 for 52-week bills.

Kevin
Yes, I get that- I suppose my question is what is the investor doing with the money in the mean time? If he/she is waiting for the "opportunistic time" to purchase- what are they doing with the funds they plan to use? Viewing things from a total asset approach.

I am not suggesting that purchasing on the secondary market is inferior. I was just a bit confused by the idea of "opportunistic" when it comes to buying these types of instruments. Essentially it would be treasury market timing correct?
Kevin is correct - it is a bit of market timing. However, this year (especially the last several months) has seen unprecedented volatility in Treasury yields - with yields on 1, 2, 3, 5 and 7 year Treasuries (those which I track every day) moving 10bps or more on a particular day not being uncommon. This has typically happened when one Fed official or anther suggests the Fed is no where near ending this rate increase cycle or when one Fed official hints that the Fed may want to slow things down and wait to see the lag affects of the unprecedented rate increases (four 75bp hikes in a row) that have already been done.

Here is some hard data.

In the month of Oct (20 trading days) here are the number of days where yields on these duration Treasuries moved by 10bps or more:

12-month Bills = 5 times or 25% of the trading days (with the largest one day move being 19bps)
2-year Notes = 7 times or 35% of the trading days (with the largest one day move being 17bps)
3-year Notes = 8 times or 40% of the trading days (with the largest one day moves being 17bps)
5-year Notes = 10 times or 50% of the trading days (with the largest one day move being 21bps)

Most of those large one day moves were up and not down in yields. And none of those days corresponded with a new issue Treasury note auction closing.

Here is another data point. On Nov 10th (the day the most recent CPI was released) the move in yields on each of the above term Treasuries were as follows:

12-month Bills = -16bps
2-year Notes = -27bps
3-year Notes = -32bps
5-year Notes = -32bps

Here are a few more examples.

The last 12-month Treasury auction was on 11/3/22 and the yield was 4.73%. On that same day, I bought a Treasury maturing on 10/31/23 (almost one year remaining) with a yield of 4.82%.

Also, the closing yield on the 12-month Treasury on 11/3 was 4.78%, on 11/7 was 4.80% and on 11/8 was 4.77%.

Being opportunistic means not being a slave to an exact term either. A remaining term of 11-13 months is close enough "to me" to be comparable to a 12-month.

Here is another example. A friend of mine (who I have helped buy some Treasury bonds) on 11/3/22 bought a note maturing in April 2024 with a yield of 4.86% and another note maturing in June of 2024 with a yield of 4.85%. Waiting for new auctions would have meant missing opportunities like these.

One more example. The last 5-year note was auctioned on 10/31/22 and the yield was 4.19%. On 11/1 the 5-year closed at 4.27%, on 11/2 it closed at 4.30% and on 11/3 it closed at 4.37%.

The big issue with new issue Treasury Note auctions (which I said above) is that you are buying on that one particular day for the month (well this applies to notes with maturities of 12-months or more). You get the yield on that day and only that day in the month - regardless of what the news happens to be. I'd rather scan that which is available on the secondary market (for various maturities) on a day when yields spike. I've shown you that in Oct this happened much more often than you'd think.

And lastly, like Kevin, most of my money awaiting deployment into Treasuries sits in either Fidelity's premium MMF (FZDXX) or Marcus (where I am earning a yield of 4.0% due to a referral bonus I am enjoying). Although to be honest, I haven't been letting cash sit for very long (days at most). I've been trying to get those funds into Treasuries ASAP (no knowing how long these attractive yields will last). This is largely funds coming from maturing CD's and called muni bonds. I fully accept that I won't get the top of the market (I am not that lucky). But I also believe that I will be very happy with the Treasuries I bought this year if not now, then by the end of Q1 or come the summer of 2023.

I hope this answers your questions.
I would say this is strictly market timing...not a "bit of market timing". Not that there is anything wrong with that. I was just looking for clarity on what you described as "opportunistic". For instance, if treasury yields for similar maturity dates is 6.5% in March 2023, then one might say your current purchases were not "opportunistic". And if they are 2.5% then it would be viewed as very opportunistic.

Thank you for clarifying.
MikeG62
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Location: New Jersey

Re: T-Bills Buying

Post by MikeG62 »

coachd50 wrote: Fri Nov 25, 2022 8:45 am
MikeG62 wrote: Fri Nov 25, 2022 8:03 am
coachd50 wrote: Thu Nov 24, 2022 5:12 pm
Kevin M wrote: Thu Nov 24, 2022 5:03 pm ^Here's an example. I bought the 4/15/2027 TIPS on secondary on 6/17/22 at a yield of 0.43%, then I bought more at auction on 6/24/22 (settle) at 0.27%. Of course it can go the other way too. This isn't a bill, but it doesn't matter to make the point.

Another benefit of secondary purchases is T+1 settlement, while at auction settlement usually is T+5 for 4-week and 8-week bills, T+3 for 13-week and 26-week bills, T+6 for 17-week bills, and T+2 for 52-week bills.

Kevin
Yes, I get that- I suppose my question is what is the investor doing with the money in the mean time? If he/she is waiting for the "opportunistic time" to purchase- what are they doing with the funds they plan to use? Viewing things from a total asset approach.

I am not suggesting that purchasing on the secondary market is inferior. I was just a bit confused by the idea of "opportunistic" when it comes to buying these types of instruments. Essentially it would be treasury market timing correct?
Kevin is correct - it is a bit of market timing. However, this year (especially the last several months) has seen unprecedented volatility in Treasury yields - with yields on 1, 2, 3, 5 and 7 year Treasuries (those which I track every day) moving 10bps or more on a particular day not being uncommon. This has typically happened when one Fed official or anther suggests the Fed is no where near ending this rate increase cycle or when one Fed official hints that the Fed may want to slow things down and wait to see the lag affects of the unprecedented rate increases (four 75bp hikes in a row) that have already been done.

Here is some hard data.

In the month of Oct (20 trading days) here are the number of days where yields on these duration Treasuries moved by 10bps or more:

12-month Bills = 5 times or 25% of the trading days (with the largest one day move being 19bps)
2-year Notes = 7 times or 35% of the trading days (with the largest one day move being 17bps)
3-year Notes = 8 times or 40% of the trading days (with the largest one day moves being 17bps)
5-year Notes = 10 times or 50% of the trading days (with the largest one day move being 21bps)

Most of those large one day moves were up and not down in yields. And none of those days corresponded with a new issue Treasury note auction closing.

Here is another data point. On Nov 10th (the day the most recent CPI was released) the move in yields on each of the above term Treasuries were as follows:

12-month Bills = -16bps
2-year Notes = -27bps
3-year Notes = -32bps
5-year Notes = -32bps

Here are a few more examples.

The last 12-month Treasury auction was on 11/3/22 and the yield was 4.73%. On that same day, I bought a Treasury maturing on 10/31/23 (almost one year remaining) with a yield of 4.82%.

Also, the closing yield on the 12-month Treasury on 11/3 was 4.78%, on 11/7 was 4.80% and on 11/8 was 4.77%.

Being opportunistic means not being a slave to an exact term either. A remaining term of 11-13 months is close enough "to me" to be comparable to a 12-month.

Here is another example. A friend of mine (who I have helped buy some Treasury bonds) on 11/3/22 bought a note maturing in April 2024 with a yield of 4.86% and another note maturing in June of 2024 with a yield of 4.85%. Waiting for new auctions would have meant missing opportunities like these.

One more example. The last 5-year note was auctioned on 10/31/22 and the yield was 4.19%. On 11/1 the 5-year closed at 4.27%, on 11/2 it closed at 4.30% and on 11/3 it closed at 4.37%.

The big issue with new issue Treasury Note auctions (which I said above) is that you are buying on that one particular day for the month (well this applies to notes with maturities of 12-months or more). You get the yield on that day and only that day in the month - regardless of what the news happens to be. I'd rather scan that which is available on the secondary market (for various maturities) on a day when yields spike. I've shown you that in Oct this happened much more often than you'd think.

And lastly, like Kevin, most of my money awaiting deployment into Treasuries sits in either Fidelity's premium MMF (FZDXX) or Marcus (where I am earning a yield of 4.0% due to a referral bonus I am enjoying). Although to be honest, I haven't been letting cash sit for very long (days at most). I've been trying to get those funds into Treasuries ASAP (no knowing how long these attractive yields will last). This is largely funds coming from maturing CD's and called muni bonds. I fully accept that I won't get the top of the market (I am not that lucky). But I also believe that I will be very happy with the Treasuries I bought this year if not now, then by the end of Q1 or come the summer of 2023.

I hope this answers your questions.
I would say this is strictly market timing...not a "bit of market timing". Not that there is anything wrong with that. I was just looking for clarity on what you described as "opportunistic". For instance, if treasury yields for similar maturity dates is 6.5% in March 2023, then one might say your current purchases were not "opportunistic". And if they are 2.5% then it would be viewed as very opportunistic.

Thank you for clarifying.
Call it what you will. I have picked up incremental yield buying in the secondary market vs. new issues much more often that not with the many (call it ~$2 million in) Treasury purchases I've made over the last several months. I think (you are free to differ in your view) that we are in a highly unusual period. I am pretty sure the Fed has never implemented four 75bp increases in a row. From a quick google search, it looks like the last time there was even one single 75bp increase was 28 years ago (Nov of 1994). This has created extreme volatility in Treasury yields and a unique (in my view) opportunity to time purchases as well as search bonds of differing maturities than simply accepting those available through new auctions.
Real Knowledge Comes Only From Experience
coachd50
Posts: 1018
Joined: Sun Oct 22, 2017 10:12 am

Re: T-Bills Buying

Post by coachd50 »

MikeG62 wrote: Fri Nov 25, 2022 9:27 am
coachd50 wrote: Fri Nov 25, 2022 8:45 am
MikeG62 wrote: Fri Nov 25, 2022 8:03 am
coachd50 wrote: Thu Nov 24, 2022 5:12 pm
Kevin M wrote: Thu Nov 24, 2022 5:03 pm ^Here's an example. I bought the 4/15/2027 TIPS on secondary on 6/17/22 at a yield of 0.43%, then I bought more at auction on 6/24/22 (settle) at 0.27%. Of course it can go the other way too. This isn't a bill, but it doesn't matter to make the point.

Another benefit of secondary purchases is T+1 settlement, while at auction settlement usually is T+5 for 4-week and 8-week bills, T+3 for 13-week and 26-week bills, T+6 for 17-week bills, and T+2 for 52-week bills.

Kevin
Yes, I get that- I suppose my question is what is the investor doing with the money in the mean time? If he/she is waiting for the "opportunistic time" to purchase- what are they doing with the funds they plan to use? Viewing things from a total asset approach.

I am not suggesting that purchasing on the secondary market is inferior. I was just a bit confused by the idea of "opportunistic" when it comes to buying these types of instruments. Essentially it would be treasury market timing correct?
Kevin is correct - it is a bit of market timing. However, this year (especially the last several months) has seen unprecedented volatility in Treasury yields - with yields on 1, 2, 3, 5 and 7 year Treasuries (those which I track every day) moving 10bps or more on a particular day not being uncommon. This has typically happened when one Fed official or anther suggests the Fed is no where near ending this rate increase cycle or when one Fed official hints that the Fed may want to slow things down and wait to see the lag affects of the unprecedented rate increases (four 75bp hikes in a row) that have already been done.

Here is some hard data.

In the month of Oct (20 trading days) here are the number of days where yields on these duration Treasuries moved by 10bps or more:

12-month Bills = 5 times or 25% of the trading days (with the largest one day move being 19bps)
2-year Notes = 7 times or 35% of the trading days (with the largest one day move being 17bps)
3-year Notes = 8 times or 40% of the trading days (with the largest one day moves being 17bps)
5-year Notes = 10 times or 50% of the trading days (with the largest one day move being 21bps)

Most of those large one day moves were up and not down in yields. And none of those days corresponded with a new issue Treasury note auction closing.

Here is another data point. On Nov 10th (the day the most recent CPI was released) the move in yields on each of the above term Treasuries were as follows:

12-month Bills = -16bps
2-year Notes = -27bps
3-year Notes = -32bps
5-year Notes = -32bps

Here are a few more examples.

The last 12-month Treasury auction was on 11/3/22 and the yield was 4.73%. On that same day, I bought a Treasury maturing on 10/31/23 (almost one year remaining) with a yield of 4.82%.

Also, the closing yield on the 12-month Treasury on 11/3 was 4.78%, on 11/7 was 4.80% and on 11/8 was 4.77%.

Being opportunistic means not being a slave to an exact term either. A remaining term of 11-13 months is close enough "to me" to be comparable to a 12-month.

Here is another example. A friend of mine (who I have helped buy some Treasury bonds) on 11/3/22 bought a note maturing in April 2024 with a yield of 4.86% and another note maturing in June of 2024 with a yield of 4.85%. Waiting for new auctions would have meant missing opportunities like these.

One more example. The last 5-year note was auctioned on 10/31/22 and the yield was 4.19%. On 11/1 the 5-year closed at 4.27%, on 11/2 it closed at 4.30% and on 11/3 it closed at 4.37%.

The big issue with new issue Treasury Note auctions (which I said above) is that you are buying on that one particular day for the month (well this applies to notes with maturities of 12-months or more). You get the yield on that day and only that day in the month - regardless of what the news happens to be. I'd rather scan that which is available on the secondary market (for various maturities) on a day when yields spike. I've shown you that in Oct this happened much more often than you'd think.

And lastly, like Kevin, most of my money awaiting deployment into Treasuries sits in either Fidelity's premium MMF (FZDXX) or Marcus (where I am earning a yield of 4.0% due to a referral bonus I am enjoying). Although to be honest, I haven't been letting cash sit for very long (days at most). I've been trying to get those funds into Treasuries ASAP (no knowing how long these attractive yields will last). This is largely funds coming from maturing CD's and called muni bonds. I fully accept that I won't get the top of the market (I am not that lucky). But I also believe that I will be very happy with the Treasuries I bought this year if not now, then by the end of Q1 or come the summer of 2023.

I hope this answers your questions.
I would say this is strictly market timing...not a "bit of market timing". Not that there is anything wrong with that. I was just looking for clarity on what you described as "opportunistic". For instance, if treasury yields for similar maturity dates is 6.5% in March 2023, then one might say your current purchases were not "opportunistic". And if they are 2.5% then it would be viewed as very opportunistic.

Thank you for clarifying.
Call it what you will. I have picked up incremental yield buying in the secondary market vs. new issues much more often that not with the many (call it ~$2 million in) Treasury purchases I've made over the last several months. I think (you are free to differ in your view) that we are in a highly unusual period. I am pretty sure the Fed has never implemented four 75bp increases in a row. From a quick google search, it looks like the last time there was even one single 75bp increase was 28 years ago (Nov of 1994). This has created extreme volatility in Treasury yields and a unique (in my view) opportunity to time purchases as well as search bonds of differing maturities than simply accepting those available through new auctions.
Don't mistake my comments as a criticism. If that's how they came off, I do apologize. I was just looking for some clarification. Essentially you are using money sitting on the sideline to buy treasuries on days where you think the yield is higher than it will be. As you pointed out, the market is quite volatile. You may be guessing right, and you may be guessing wrong- but as long as you are getting a return you feel is fair that is what matters.

As far as the secondary vs auction, I was not looking at it from a market timing/guessing perspective. I don't think auctions are superior, I was just looking to see if I was misunderstanding the fundamentals of the bond market.
MikeG62
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Location: New Jersey

Re: T-Bills Buying

Post by MikeG62 »

coachd50 wrote: Fri Nov 25, 2022 9:44 am
Don't mistake my comments as a criticism. If that's how they came off, I do apologize. I was just looking for some clarification. Essentially you are using money sitting on the sideline to buy treasuries on days where you think the yield is higher than it will be. As you pointed out, the market is quite volatile. You may be guessing right, and you may be guessing wrong- but as long as you are getting a return you feel is fair that is what matters.

As far as the secondary vs auction, I was not looking at it from a market timing/guessing perspective. I don't think auctions are superior, I was just looking to see if I was misunderstanding the fundamentals of the bond market.
No worries. The back and forth on these boards is where value is added to all those who read these threads.

I would add that I have also sold Treasuries that were scheduled to mature in a few days or weeks (i.e., sold them early) to free up cash to invest on a day when Treasury yields spiked. I have only done this when the discount to par value was tiny. But I've done it I think three times over the last 30 days.

My one regret has been not going out further on the yield curve for a larger share of my Treasury purchases.
Real Knowledge Comes Only From Experience
coachd50
Posts: 1018
Joined: Sun Oct 22, 2017 10:12 am

Re: T-Bills Buying

Post by coachd50 »

MikeG62 wrote: Fri Nov 25, 2022 9:53 am
coachd50 wrote: Fri Nov 25, 2022 9:44 am
Don't mistake my comments as a criticism. If that's how they came off, I do apologize. I was just looking for some clarification. Essentially you are using money sitting on the sideline to buy treasuries on days where you think the yield is higher than it will be. As you pointed out, the market is quite volatile. You may be guessing right, and you may be guessing wrong- but as long as you are getting a return you feel is fair that is what matters.

As far as the secondary vs auction, I was not looking at it from a market timing/guessing perspective. I don't think auctions are superior, I was just looking to see if I was misunderstanding the fundamentals of the bond market.
No worries. The back and forth on these boards is where value is added to all those who read these threads.

I would add that I have also sold Treasuries that were scheduled to mature in a few days or weeks (i.e., sold them early) to free up cash to invest on a day when Treasury yields spiked. I have only done this when the discount to par value was tiny. But I've done it I think three times over the last 30 days.

My one regret has been not going out further on the yield curve for a larger share of my Treasury purchases.
I guess my point (and label of market timing) is because you don't know when the yields have "spiked" until after the fact. You know they are higher today than yesterday, BUT do not know if they are higher today than they will be tomorrow. Like the inverse of someone saying they are sitting around with "dry powder" waiting for the market to reach bottom to invest in equities. Granted, there is less downside with treasuries :) Nothing wrong with saying "A treasury instrument is worth ______ to me, and I will buy when the price is that".
MikeG62
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Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: T-Bills Buying

Post by MikeG62 »

coachd50 wrote: Fri Nov 25, 2022 10:08 am
MikeG62 wrote: Fri Nov 25, 2022 9:53 am
coachd50 wrote: Fri Nov 25, 2022 9:44 am
Don't mistake my comments as a criticism. If that's how they came off, I do apologize. I was just looking for some clarification. Essentially you are using money sitting on the sideline to buy treasuries on days where you think the yield is higher than it will be. As you pointed out, the market is quite volatile. You may be guessing right, and you may be guessing wrong- but as long as you are getting a return you feel is fair that is what matters.

As far as the secondary vs auction, I was not looking at it from a market timing/guessing perspective. I don't think auctions are superior, I was just looking to see if I was misunderstanding the fundamentals of the bond market.
No worries. The back and forth on these boards is where value is added to all those who read these threads.

I would add that I have also sold Treasuries that were scheduled to mature in a few days or weeks (i.e., sold them early) to free up cash to invest on a day when Treasury yields spiked. I have only done this when the discount to par value was tiny. But I've done it I think three times over the last 30 days.

My one regret has been not going out further on the yield curve for a larger share of my Treasury purchases.
I guess my point (and label of market timing) is because you don't know when the yields have "spiked" until after the fact. You know they are higher today than yesterday, BUT do not know if they are higher today than they will be tomorrow. Like the inverse of someone saying they are sitting around with "dry powder" waiting for the market to reach bottom to invest in equities. Granted, there is less downside with treasuries :) Nothing wrong with saying "A treasury instrument is worth ______ to me, and I will buy when the price is that".
You are correct. When I say "spiked" I am referring to a large move up from the prior day or a large move up over the last several days. I have no way of knowing whether I got the top of the market in advance and fully accept that I have not. But I am pretty confident I did better than just accepting what the new auction market will give me on that one day the new issue auction was completed for that month.

I had a friend I was helping buy Treasuries. He stated in the new issues market. As he was waiting on new auctions, he began looking in the secondary market. He became convinced he could go better in the secondary market and once he began buying in that market he never returned to the new issues market.

Having said all of this, there are plenty of people on these boards who buy only new issues. There are others who prefer to just purchase shares in a bond fund and call it a day. Different strokes for different folks.
Real Knowledge Comes Only From Experience
coachd50
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Re: T-Bills Buying

Post by coachd50 »

MikeG62 wrote: Fri Nov 25, 2022 12:29 pm
coachd50 wrote: Fri Nov 25, 2022 10:08 am
MikeG62 wrote: Fri Nov 25, 2022 9:53 am
coachd50 wrote: Fri Nov 25, 2022 9:44 am
Don't mistake my comments as a criticism. If that's how they came off, I do apologize. I was just looking for some clarification. Essentially you are using money sitting on the sideline to buy treasuries on days where you think the yield is higher than it will be. As you pointed out, the market is quite volatile. You may be guessing right, and you may be guessing wrong- but as long as you are getting a return you feel is fair that is what matters.

As far as the secondary vs auction, I was not looking at it from a market timing/guessing perspective. I don't think auctions are superior, I was just looking to see if I was misunderstanding the fundamentals of the bond market.
No worries. The back and forth on these boards is where value is added to all those who read these threads.

I would add that I have also sold Treasuries that were scheduled to mature in a few days or weeks (i.e., sold them early) to free up cash to invest on a day when Treasury yields spiked. I have only done this when the discount to par value was tiny. But I've done it I think three times over the last 30 days.

My one regret has been not going out further on the yield curve for a larger share of my Treasury purchases.
I guess my point (and label of market timing) is because you don't know when the yields have "spiked" until after the fact. You know they are higher today than yesterday, BUT do not know if they are higher today than they will be tomorrow. Like the inverse of someone saying they are sitting around with "dry powder" waiting for the market to reach bottom to invest in equities. Granted, there is less downside with treasuries :) Nothing wrong with saying "A treasury instrument is worth ______ to me, and I will buy when the price is that".
You are correct. When I say "spiked" I am referring to a large move up from the prior day or a large move up over the last several days. I have no way of knowing whether I got the top of the market in advance and fully accept that I have not. But I am pretty confident I did better than just accepting what the new auction market will give me on that one day the new issue auction was completed for that month.

I had a friend I was helping buy Treasuries. He stated in the new issues market. As he was waiting on new auctions, he began looking in the secondary market. He became convinced he could go better in the secondary market and once he began buying in that market he never returned to the new issues market.

Having said all of this, there are plenty of people on these boards who buy only new issues. There are others who prefer to just purchase shares in a bond fund and call it a day. Different strokes for different folks.
I absolutely agree that one can "do better" in the secondary market- if for no other reason than you are not restricted by time. It might not be better with respect to actual returns- you might buy a bunch and then the yields go higher in two weeks at auction time. But better in the case that one doesn't have to wait and when one sees a yield that is appropriate to their situation, they can get them.

But ultimately, without unlimited "dry powder" I am not sure how much difference would truly be made waiting for "opportunistic" times once factoring in the missed earnings of the money being held while waiting as well as missed earnings that occur when purchases are not made at the top of the market. However, the key is feeling comfortable with ENOUGH, and I suppose technically that if they are held to maturity, unlike someone trying to time purchases when equities "spike" (or more accurately drop) and are subject to catching a falling knife and losing their investment, the risk here is simply losing out on what could have been.
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Kevin M
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Re: T-Bills Buying

Post by Kevin M »

Below is a chart of the 1-year constant maturity Treasury (CMT) yield and effective federal funds rate (EFFR) over the last year.

Image

We can see the yield spikes, their relationship to increases in EFFR, and what happened after the yield spikes.

One spike that stands our is leading up to the day of the EFFR increase on Jun 15.

Here is a chart of the change in yield over time:

Image

Looking at dates around the Jun 15 FFR increase:

Code: Select all

DATE	DGS1 change
6/9/22	0.06
6/10/22	0.23
6/13/22	0.31
6/14/22	0.26
6/15/22	-0.22
6/16/22	-0.05
6/17/22	-0.02
So there were three big positive spikes on the three days before the FFR increase, and a big negative spike on the day of the FFR increase.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
MikeG62
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Re: T-Bills Buying

Post by MikeG62 »

coachd50 wrote: Fri Nov 25, 2022 12:39 pm
I absolutely agree that one can "do better" in the secondary market- if for no other reason than you are not restricted by time. It might not be better with respect to actual returns- you might buy a bunch and then the yields go higher in two weeks at auction time. But better in the case that one doesn't have to wait and when one sees a yield that is appropriate to their situation, they can get them.

But ultimately, without unlimited "dry powder" I am not sure how much difference would truly be made waiting for "opportunistic" times once factoring in the missed earnings of the money being held while waiting as well as missed earnings that occur when purchases are not made at the top of the market. However, the key is feeling comfortable with ENOUGH, and I suppose technically that if they are held to maturity, unlike someone trying to time purchases when equities "spike" (or more accurately drop) and are subject to catching a falling knife and losing their investment, the risk here is simply losing out on what could have been.
I don't disagree that the differences are small. After all, we are talking about basis points or maybe 10-20bps at most. Even when buying 100 bonds, 10-20bps amounts to $100-$200 over the course of a year. Having said that, I'd rather get a higher yield than not and I'd prefer to make the purchase on the day I choose knowing precisely what my yield is going to be for the remaining term of the Treasury bill/note.

Keep in mind that a key benefit of buying in the secondary market is being able to buy Treasuries maturing at any time (amongst the Treasuries that are available of course). One is not limited to only buying standard maturities. In my experience, this is where I feel I have reaped the biggest benefit (found the most attractive anomalies). I gave the example of my friend who bought two different Treasuries on 11/3/22 (a note maturing in April 2024 with a yield of 4.86% and another note maturing in June of 2024 with a yield of 4.85%). The nearest 12-month new issue (on 11/3) had a yield of 4.73% while the nearest 2-year new issue (on 10/31) had a yield of 4.46%. Note as well that the closing yields for 12-month and 2-year Treasuries on 11/3/22 were 4.78% and 4.72%, respectively. Yet, by buying Treasuries maturing in 18 months and 20 months he was able to do considerably better than the nearest comparable term new issue Treasury auctions and better even than had there been 12-month and 2-year auctions on the day he made those investments.

So, if I want a Treasury maturing in approximately 12-months, I will search the secondary market for all Treasuries maturing roughly 9-15 months. If I want a Treasury maturing in approximately 3-years, I will look for Treasuries maturing in roughly 32-40 months (and so on and so forth).

With regard to missed earnings, I would submit that more earnings may be missed while sitting around waiting for periodic, once a month, new (12-month and longer) auctions to happen that buying opportunistically (at least in my case, buying opportunistically has usually been within days or a week of the funds coming available and not waiting weeks given how volatile yields have been), with funds invested in the meantime in a high yielding premium MMF or HYSA. I admit that this has applied to the Treasury market in 2022. Once things settle down and the market is more "normal", it might just make more sense to buy as soon as funds come available.

Lastly, the risk in not getting the top of the market applies to both new issues and purchases in the secondary market. No one knows whether yields will be higher a day, week or month(s) into the future. The yield comparison we've been discussing is between buying new issues vs. buying in the secondary market.
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coachd50
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Re: T-Bills Buying

Post by coachd50 »

MikeG62 wrote: Sat Nov 26, 2022 8:03 am
coachd50 wrote: Fri Nov 25, 2022 12:39 pm
I absolutely agree that one can "do better" in the secondary market- if for no other reason than you are not restricted by time. It might not be better with respect to actual returns- you might buy a bunch and then the yields go higher in two weeks at auction time. But better in the case that one doesn't have to wait and when one sees a yield that is appropriate to their situation, they can get them.

But ultimately, without unlimited "dry powder" I am not sure how much difference would truly be made waiting for "opportunistic" times once factoring in the missed earnings of the money being held while waiting as well as missed earnings that occur when purchases are not made at the top of the market. However, the key is feeling comfortable with ENOUGH, and I suppose technically that if they are held to maturity, unlike someone trying to time purchases when equities "spike" (or more accurately drop) and are subject to catching a falling knife and losing their investment, the risk here is simply losing out on what could have been.
I don't disagree that the differences are small. After all, we are talking about basis points or maybe 10-20bps at most. Even when buying 100 bonds, 10-20bps amounts to $100-$200 over the course of a year. Having said that, I'd rather get a higher yield than not and I'd prefer to make the purchase on the day I choose knowing precisely what my yield is going to be for the remaining term of the Treasury bill/note.

Keep in mind that a key benefit of buying in the secondary market is being able to buy Treasuries maturing at any time (amongst the Treasuries that are available of course). One is not limited to only buying standard maturities. In my experience, this is where I feel I have reaped the biggest benefit (found the most attractive anomalies). I gave the example of my friend who bought two different Treasuries on 11/3/22 (a note maturing in April 2024 with a yield of 4.86% and another note maturing in June of 2024 with a yield of 4.85%). The nearest 12-month new issue (on 11/3) had a yield of 4.73% while the nearest 2-year new issue (on 10/31) had a yield of 4.46%. Note as well that the closing yields for 12-month and 2-year Treasuries on 11/3/22 were 4.78% and 4.72%, respectively. Yet, by buying Treasuries maturing in 18 months and 20 months he was able to do considerably better than the nearest comparable term new issue Treasury auctions and better even than had there been 12-month and 2-year auctions on the day he made those investments.

So, if I want a Treasury maturing in approximately 12-months, I will search the secondary market for all Treasuries maturing roughly 9-15 months. If I want a Treasury maturing in approximately 3-years, I will look for Treasuries maturing in roughly 32-40 months (and so on and so forth).

With regard to missed earnings, I would submit that more earnings may be missed while sitting around waiting for periodic, once a month, new (12-month and longer) auctions to happen that buying opportunistically (at least in my case, buying opportunistically has usually been within days or a week of the funds coming available and not waiting weeks given how volatile yields have been), with funds invested in the meantime in a high yielding premium MMF or HYSA. I admit that this has applied to the Treasury market in 2022. Once things settle down and the market is more "normal", it might just make more sense to buy as soon as funds come available.

Lastly, the risk in not getting the top of the market applies to both new issues and purchases in the secondary market. No one knows whether yields will be higher a day, week or month(s) into the future. The yield comparison we've been discussing is between buying new issues vs. buying in the secondary market.
I 100% agree that secondary market purchases give the investor the ability to find a yield they feel works in their situation much more than having to wait for an auction window. I wasn't suggesting that new issues were superior. I just wanted to clarify what you meant by opportunistic, which I still say remains to be seen since we may see yields above 5% in the coming weeks. Or we may not. But secondary market purchases definitely give more flexibility for investors. I think the takeaway is that investors should not be concerned or hesitant to buy on the secondary market.
cas
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Re: T-Bills Buying

Post by cas »

coachd50 wrote: Sat Nov 26, 2022 8:45 am I think the takeaway is that investors should not be concerned or hesitant to buy on the secondary market.
Before anyone dives into purchasing secondary market treasuries in a taxable account, they should fully inform themselves of the additional tax reporting issues: Taxation of Treasury bills, notes and bonds megathread

Plenty of confusion over there at all ages and stages.

And, of particular relevance to older taxpayers (or their adult children advising them on finances), there has already been at least one report of someone discovering that their elderly father's ownership of a secondary treasury in a taxable account has disqualified him from being able to use the free service he usually uses where volunteers prepare his tax return for him. (e.g. AARP Tax Aide or IRS VITA)
coachd50
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Re: T-Bills Buying

Post by coachd50 »

cas wrote: Sat Nov 26, 2022 9:24 am
coachd50 wrote: Sat Nov 26, 2022 8:45 am I think the takeaway is that investors should not be concerned or hesitant to buy on the secondary market.
Before anyone dives into purchasing secondary market treasuries in a taxable account, they should fully inform themselves of the additional tax reporting issues: Taxation of Treasury bills, notes and bonds megathread

Plenty of confusion over there at all ages and stages.

And, of particular relevance to older taxpayers (or their adult children advising them on finances), there has already been at least one report of someone discovering that their elderly father's ownership of a secondary treasury in a taxable account has disqualified him from being able to use the free service he usually uses where volunteers prepare his tax return for him. (e.g. AARP Tax Aide or IRS VITA)
Excellent point. I should have added "other than potential tax issues, investors should not be concerned or hesitant to buy on the secondary market"
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