Buying Treasurys

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dr350rex
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Buying Treasurys

Post by dr350rex »

Hello, Bogleheads:

I'm trying to remember what I forgot from Finance class so I can understand what I'm doing before I buy Treasurys.

Looking at E*Trade, they have three listings for five-year Treasury Bonds available for purchase. (Sorry but I couldn't figure out how to add an image.)

COUPON MATURITY PRICE YTM YTW
6.125 11/15/2027 108.566 4.247 4.247
6.375 08/15/2027 109.37 4.228 4.228
3.125 08/31/2027 95.344 4.181 4.181

What I'm trying to do is understand the relationships between coupon, price, and yield so as to judge which of these issues I would buy.

In the first two cases, the coupon is higher than the yield, so that's why the price is higher than the bond's par value of 100, yes?

In the latter case, the coupon is lower than the yield, so that's why the price is below the bond's par value of 100, because people would rather buy a bond with a higher coupon and therefore this issue is less attractive?

If I bought $100000 of each issue and held until maturity, can I know that I would I then have $104247, $104228, and $104181 respectively?

Other than a few bucks, what are the relative merits of each of these issues? I guess the first two would be better for people who wanted to maximize semi-annual interest payments - is that right? So if I'm not interested in that, would I be better off with the third even though the yield is a little lower?

Thanks for any tutelage. I have trouble wrapping my head around bonds. Wishing you all health and wealth and happiness.
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retired@50
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Re: Buying Treasurys

Post by retired@50 »

This thread may help: viewtopic.php?t=378350

Regards,
This is one person's opinion. Nothing more.
FactualFran
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Re: Buying Treasurys

Post by FactualFran »

You would not have those amounts because the quoted yields are annualized and the securities do not mature in exactly one year. Even taking into account that the quoted yields are annualized, you would end up with an amount corresponding to those yields if you were able to invest each semi-annual coupon payment at the same yield as the purchase yield.

With the one maturing 11/15/2027, you would pay $108,566 for the principal plus $2,346.81 in accrued interest (with 10/03/2022 as the settlement date), for a total of $110,912.81. You would receive a total of $33,687.50 from the 11 interest payments plus $100,000 at maturity, for a total of $133,687.50. The overall difference would be $22,774.69, excluding any gain you would get from investing each coupon payment.

[Edit: Corrected accrued interest amount and values that depend on it.]
Last edited by FactualFran on Fri Sep 30, 2022 5:58 pm, edited 1 time in total.
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Artsdoctor
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Re: Buying Treasurys

Post by Artsdoctor »

OP: As you're learning about buying treasuries, I would suggest that you try it out but in a tax-advantaged accounts. Buying in a taxable account, if you're inclined, would be wiser after you've become more familiar with the tax ramifications of purchasing treasuries on the secondary market.
Topic Author
dr350rex
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Re: Buying Treasurys

Post by dr350rex »

retired@50 wrote: Fri Sep 30, 2022 2:26 pm This thread may help: viewtopic.php?t=378350

Regards,
Thank you! Digging in …
Topic Author
dr350rex
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Re: Buying Treasurys

Post by dr350rex »

FactualFran wrote: Fri Sep 30, 2022 3:25 pm You would not have those amounts because the quoted yields are annualized and the securities do not mature in exactly one year. Even taking into account that the quoted yields are annualized, you would end up with an amount corresponding to those yields if you were able to invest each semi-annual coupon payment at the same yield as the purchase yield.

With the one maturing 11/15/2027, you would pay $108,566 for the principal plus $2,282.88 in accrued interest (with 10/03/2022 as the settlement date), for a total of $110,948.88. You would receive a total of $33,687.50 from the 11 interest payments plus $100,000 at maturity, for a total of $133,687.50. The overall difference would be $22,738.62, excluding any gain you would get from investing each coupon payment.
Duh - it’s an annualized yield. Thank you for doing the math on that example. Really helped.
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dr350rex
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Re: Buying Treasurys

Post by dr350rex »

Artsdoctor wrote: Fri Sep 30, 2022 3:42 pm OP: As you're learning about buying treasuries, I would suggest that you try it out but in a tax-advantaged accounts. Buying in a taxable account, if you're inclined, would be wiser after you've become more familiar with the tax ramifications of purchasing treasuries on the secondary market.
This is money from the sale of real estate that is going to be my bridge into an early retirement, so unfortunately it has to go in a taxable account. Can you summarize the cons with respect to taxes for buying treasuries in taxable on the secondary market or point me to a good link? Would it be better to buy them direct at auction? Thank you.
MattB
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Re: Buying Treasurys

Post by MattB »

dr350rex wrote: Fri Sep 30, 2022 4:49 pm This is money from the sale of real estate that is going to be my bridge into an early retirement, so unfortunately it has to go in a taxable account.
Money is fungible. If you have equities in a tax deferred account, you could sell them in exchange for bonds within your tax deferred account. You could then take the money from the sale of your real estate and invest it in equities in a taxable account.
dr350rex wrote: Fri Sep 30, 2022 4:49 pm Can you summarize the cons with respect to taxes for buying treasuries in taxable on the secondary market or point me to a good link? Would it be better to buy them direct at auction? Thank you.
I would like to better understand this; I've avoided purchasing treasuries on the secondary market because of my ignorance here.
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Hector
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Re: Buying Treasurys

Post by Hector »

MattB wrote: Fri Sep 30, 2022 5:13 pm
dr350rex wrote: Fri Sep 30, 2022 4:49 pm This is money from the sale of real estate that is going to be my bridge into an early retirement, so unfortunately it has to go in a taxable account.
Money is fungible. If you have equities in a tax deferred account, you could sell them in exchange for bonds within your tax deferred account. You could then take the money from the sale of your real estate and invest it in equities in a taxable account.
dr350rex wrote: Fri Sep 30, 2022 4:49 pm Can you summarize the cons with respect to taxes for buying treasuries in taxable on the secondary market or point me to a good link? Would it be better to buy them direct at auction? Thank you.
I would like to better understand this; I've avoided purchasing treasuries on the secondary market because of my ignorance here.
There is not much difference in prices when buying at auction vs secondary market. If you want exact comparison, you can see quotes in the secondary market on the day of auction. Another way is to compare yield in secondary market quote with WSJ and/or with https://home.treasury.gov/resource-cent ... nth=202209
mongstradamus
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Re: Buying Treasurys

Post by mongstradamus »

Hector wrote: Fri Sep 30, 2022 5:34 pm
MattB wrote: Fri Sep 30, 2022 5:13 pm
dr350rex wrote: Fri Sep 30, 2022 4:49 pm This is money from the sale of real estate that is going to be my bridge into an early retirement, so unfortunately it has to go in a taxable account.
Money is fungible. If you have equities in a tax deferred account, you could sell them in exchange for bonds within your tax deferred account. You could then take the money from the sale of your real estate and invest it in equities in a taxable account.
dr350rex wrote: Fri Sep 30, 2022 4:49 pm Can you summarize the cons with respect to taxes for buying treasuries in taxable on the secondary market or point me to a good link? Would it be better to buy them direct at auction? Thank you.
I would like to better understand this; I've avoided purchasing treasuries on the secondary market because of my ignorance here.
There is not much difference in prices when buying at auction vs secondary market. If you want exact comparison, you can see quotes in the secondary market on the day of auction. Another way is to compare yield in secondary market quote with WSJ and/or with https://home.treasury.gov/resource-cent ... nth=202209
If you want the easiest set and forget I prefer auctions at fidelity and auto re-roll. In my personal experience for comparisons between secondary and auction, I never found secondary market being that close to auction yields, but I realize i am not buying that much and I am going for shorter term tbills like 3 months only.

Some people don't like to have to wait for settlement date post auction for tbills on auction so secondary market is preferable, but for me I just like the ease of auto re rolling my auctions and calling it a day.
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Artsdoctor
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Re: Buying Treasurys

Post by Artsdoctor »

dr350rex wrote: Fri Sep 30, 2022 4:49 pm
Artsdoctor wrote: Fri Sep 30, 2022 3:42 pm OP: As you're learning about buying treasuries, I would suggest that you try it out but in a tax-advantaged accounts. Buying in a taxable account, if you're inclined, would be wiser after you've become more familiar with the tax ramifications of purchasing treasuries on the secondary market.
This is money from the sale of real estate that is going to be my bridge into an early retirement, so unfortunately it has to go in a taxable account. Can you summarize the cons with respect to taxes for buying treasuries in taxable on the secondary market or point me to a good link? Would it be better to buy them direct at auction? Thank you.
The first question will always be: what is your goal? I've leave that to another conversation.

As far as the mechanics of buying treasuries, you can find a lot of information on this site regarding this since so many people are currently in doing this.

Because you're new to this, I would suggest that you buy treasuries at auction. You're in luck, in a way, because the yields for short-term treasuries are better than for longer term treasuries. This allows you to "practice" without a lot of long-term commitment.

You'll probably buy 6-month or 12-month T-bills at auction with the intent of holding them until until maturity. If you'd like to buy 3-month T-bills because it's your first time, no problem at all.

Buying on the secondary market is easy but there are a few tax issues you'll need to keep in mind. This will make a lot more sense once you've tried your hand at buying at auction. Ultimately, you'll find that buying on the secondary market is extremely easy and efficient but try the auction first.

However, it's always back to basics. What are your goals with this money? T-bills are terrific right now but they're not a long-term investment strategy.
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dr350rex
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Re: Buying Treasurys

Post by dr350rex »

Artsdoctor wrote: Fri Sep 30, 2022 6:55 pm
dr350rex wrote: Fri Sep 30, 2022 4:49 pm
Artsdoctor wrote: Fri Sep 30, 2022 3:42 pm OP: As you're learning about buying treasuries, I would suggest that you try it out but in a tax-advantaged accounts. Buying in a taxable account, if you're inclined, would be wiser after you've become more familiar with the tax ramifications of purchasing treasuries on the secondary market.
This is money from the sale of real estate that is going to be my bridge into an early retirement, so unfortunately it has to go in a taxable account. Can you summarize the cons with respect to taxes for buying treasuries in taxable on the secondary market or point me to a good link? Would it be better to buy them direct at auction? Thank you.
The first question will always be: what is your goal? I've leave that to another conversation.

As far as the mechanics of buying treasuries, you can find a lot of information on this site regarding this since so many people are currently in doing this.

Because you're new to this, I would suggest that you buy treasuries at auction. You're in luck, in a way, because the yields for short-term treasuries are better than for longer term treasuries. This allows you to "practice" without a lot of long-term commitment.

You'll probably buy 6-month or 12-month T-bills at auction with the intent of holding them until until maturity. If you'd like to buy 3-month T-bills because it's your first time, no problem at all.

Buying on the secondary market is easy but there are a few tax issues you'll need to keep in mind. This will make a lot more sense once you've tried your hand at buying at auction. Ultimately, you'll find that buying on the secondary market is extremely easy and efficient but try the auction first.

However, it's always back to basics. What are your goals with this money? T-bills are terrific right now but they're not a long-term investment strategy.
So my goal is to preserve capital and make a little on it if I can - it’s ok if it doesn’t keep up with inflation. My other retirement pieces look good (IRA, Roth, pension, SS) but this money needs to be there in 5 years as a bridge to those other pieces. I am thinking a Treasury ladder of 1, 2, 3, and 5 year rungs looks appropriate, but the mechanics of it all have me flummoxed. Great idea to “practice” with short-termers. Do you recommend buying at auction through Treasury Direct or another party like Fidelity? I don’t think I can do it at E*Trade. Thank you for your input!
prozario01
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Re: Buying Treasurys

Post by prozario01 »

If i could piggyback off this thread on a question about tax - in a taxable account, buying in the secondary market. I've Merrill Edge - which only offers to buy in secondary.

1) If I buy a Treasury bill/note - and hold to maturity - it'll be taxed as ordinary income, correct? I pay Fed tax but not sate tax?
2). What i'm a bit confused about - if i don't let it mature and sell it before - does it become cap gain? Basically is it possible to switch the income from interest income to cap gain?
the_wiki
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Re: Buying Treasurys

Post by the_wiki »

dr350rex wrote: Fri Sep 30, 2022 7:15 pm

So my goal is to preserve capital and make a little on it if I can - it’s ok if it doesn’t keep up with inflation. My other retirement pieces look good (IRA, Roth, pension, SS) but this money needs to be there in 5 years as a bridge to those other pieces. I am thinking a Treasury ladder of 1, 2, 3, and 5 year rungs looks appropriate, but the mechanics of it all have me flummoxed. Great idea to “practice” with short-termers. Do you recommend buying at auction through Treasury Direct or another party like Fidelity? I don’t think I can do it at E*Trade. Thank you for your input!
CDs are paying about the same as Treasuries right now (depending on the duration actually a bit more). Those are a lot easier for me to understand personally, because it's just like a savings account with restricted withdrawal terms.

Since you are in Etrade, you can use their Bond ladder build and then choose FDIC Brokered CDs. They will be offered from big banks you've probably heard of. Paying 4% for 1 year up to 4.5% for 5 year.
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dr350rex
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Re: Buying Treasurys

Post by dr350rex »

the_wiki wrote: Fri Sep 30, 2022 8:58 pm
dr350rex wrote: Fri Sep 30, 2022 7:15 pm

So my goal is to preserve capital and make a little on it if I can - it’s ok if it doesn’t keep up with inflation. My other retirement pieces look good (IRA, Roth, pension, SS) but this money needs to be there in 5 years as a bridge to those other pieces. I am thinking a Treasury ladder of 1, 2, 3, and 5 year rungs looks appropriate, but the mechanics of it all have me flummoxed. Great idea to “practice” with short-termers. Do you recommend buying at auction through Treasury Direct or another party like Fidelity? I don’t think I can do it at E*Trade. Thank you for your input!
CDs are paying about the same as Treasuries right now (depending on the duration actually a bit more). Those are a lot easier for me to understand personally, because it's just like a savings account with restricted withdrawal terms.

Since you are in Etrade, you can use their Bond ladder build and then choose FDIC Brokered CDs. They will be offered from big banks you've probably heard of. Paying 4% for 1 year up to 4.5% for 5 year.
There’s a lot to be said for simplicity. It’s probably worth a few basis points. Thanks.
cas
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Re: Buying Treasurys

Post by cas »

dr350rex wrote: Fri Sep 30, 2022 9:32 pm
the_wiki wrote: Fri Sep 30, 2022 8:58 pm CDs are paying about the same as Treasuries right now (depending on the duration actually a bit more). Those are a lot easier for me to understand personally, because it's just like a savings account with restricted withdrawal terms.

Since you are in Etrade, you can use their Bond ladder build and then choose FDIC Brokered CDs. They will be offered from big banks you've probably heard of. Paying 4% for 1 year up to 4.5% for 5 year.
There’s a lot to be said for simplicity. It’s probably worth a few basis points. Thanks.
The *brokered* CDs that the_wiki seems to be commending to you don't behave, in my experience, "just like a savings account with restricted withdrawal terms." That is more a description of CDs bought directly from a bank. Brokered CDs behave very much like bonds, from my perspective. But maybe the_wiki is coming at it from a different perspective that wasn't made clear.

You might want to get the_wiki to explain a bit more exactly what aspects of a brokered CD s(he) thinks are and are not "just like a savings account with restricted withdrawal terms."
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dr350rex
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Re: Buying Treasurys

Post by dr350rex »

cas wrote: Sat Oct 01, 2022 6:29 am [quote=dr350rex post_id=6895904 time=<a href="tel:1664591570">1664591570</a> user_id=177849]
[quote=the_wiki post_id=6895881 time=<a href="tel:1664589504">1664589504</a> user_id=187190]
CDs are paying about the same as Treasuries right now (depending on the duration actually a bit more). Those are a lot easier for me to understand personally, because it's just like a savings account with restricted withdrawal terms.

Since you are in Etrade, you can use their Bond ladder build and then choose FDIC Brokered CDs. They will be offered from big banks you've probably heard of. Paying 4% for 1 year up to 4.5% for 5 year.
There’s a lot to be said for simplicity. It’s probably worth a few basis points. Thanks.
[/quote]

The *brokered* CDs that the_wiki seems to be commending to you don't behave, in my experience, "just like a savings account with restricted withdrawal terms." That is more a description of CDs bought directly from a bank. Brokered CDs behave very much like bonds, from my perspective. But maybe the_wiki is coming at it from a different perspective that wasn't made clear.

You might want to get the_wiki to explain a bit more exactly what aspects of a brokered CD s(he) thinks are and are not "just like a savings account with restricted withdrawal terms."
[/quote]
cas wrote: Sat Oct 01, 2022 6:29 am
dr350rex wrote: Fri Sep 30, 2022 9:32 pm
the_wiki wrote: Fri Sep 30, 2022 8:58 pm CDs are paying about the same as Treasuries right now (depending on the duration actually a bit more). Those are a lot easier for me to understand personally, because it's just like a savings account with restricted withdrawal terms.

Since you are in Etrade, you can use their Bond ladder build and then choose FDIC Brokered CDs. They will be offered from big banks you've probably heard of. Paying 4% for 1 year up to 4.5% for 5 year.
There’s a lot to be said for simplicity. It’s probably worth a few basis points. Thanks.
The *brokered* CDs that the_wiki seems to be commending to you don't behave, in my experience, "just like a savings account with restricted withdrawal terms." That is more a description of CDs bought directly from a bank. Brokered CDs behave very much like bonds, from my perspective. But maybe the_wiki is coming at it from a different perspective that wasn't made clear.

You might want to get the_wiki to explain a bit more exactly what aspects of a brokered CD s(he) thinks are and are not "just like a savings account with restricted withdrawal terms."
Good point. I am not familiar with the nuances between the two. This is turning out to be a deep rabbit hole …
MikeG62
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Re: Buying Treasurys

Post by MikeG62 »

dr350rex wrote: Fri Sep 30, 2022 2:09 pm Hello, Bogleheads:

I'm trying to remember what I forgot from Finance class so I can understand what I'm doing before I buy Treasurys.

Looking at E*Trade, they have three listings for five-year Treasury Bonds available for purchase. (Sorry but I couldn't figure out how to add an image.)

COUPON MATURITY PRICE YTM YTW
6.125 11/15/2027 108.566 4.247 4.247
6.375 08/15/2027 109.37 4.228 4.228
3.125 08/31/2027 95.344 4.181 4.181

What I'm trying to do is understand the relationships between coupon, price, and yield so as to judge which of these issues I would buy.

In the first two cases, the coupon is higher than the yield, so that's why the price is higher than the bond's par value of 100, yes?

In the latter case, the coupon is lower than the yield, so that's why the price is below the bond's par value of 100, because people would rather buy a bond with a higher coupon and therefore this issue is less attractive?

If I bought $100000 of each issue and held until maturity, can I know that I would I then have $104247, $104228, and $104181 respectively?

Other than a few bucks, what are the relative merits of each of these issues? I guess the first two would be better for people who wanted to maximize semi-annual interest payments - is that right? So if I'm not interested in that, would I be better off with the third even though the yield is a little lower?

Thanks for any tutelage. I have trouble wrapping my head around bonds. Wishing you all health and wealth and happiness.
OP, there can be income tax reporting considerations when purchasing bonds in the secondary market at a discount or a premium. Read this well written article for more info on that.

https://s3.amazonaws.com/static.content ... 969ee5.pdf

In my view it is not a big deal as long as you make a decision as to how to handle the accretion (in the case of bonds bought at a discount) or amortization (in the case of bonds bought at a premium). I've bought many Treasuries at a discount this year and I made the election with my broker to tax the accretion annually. No big deal, but I did need to submit a form.

Setting that aside, I think I would go with the first one - highest yield with a slightly (but not a materially) longer duration. Actually, I think I would leg in since there is no way to know if rates are going higher in the coming months (so some of this bond and keeping some dry powder for future purchases). Others might suggest going all in now and they would not necessarily be wrong. It is a personal choice. I tend to be a dollar cost averager.

Good luck whatever you decide to do.
Real Knowledge Comes Only From Experience
FactualFran
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Re: Buying Treasurys

Post by FactualFran »

prozario01 wrote: Fri Sep 30, 2022 8:21 pm If i could piggyback off this thread on a question about tax - in a taxable account, buying in the secondary market. I've Merrill Edge - which only offers to buy in secondary.

1) If I buy a Treasury bill/note - and hold to maturity - it'll be taxed as ordinary income, correct? I pay Fed tax but not sate tax?
2). What i'm a bit confused about - if i don't let it mature and sell it before - does it become cap gain? Basically is it possible to switch the income from interest income to cap gain?
A short answer is that selling before maturity does not switch interest income to cap gain.

In general, the discount in the purchase price accrues over time, is taxed as ordinary income, and increases the basis so that the basis at maturity is equal to the maturity value. At maturity, the capital gain will be zero. Prior to maturity, the capital gain will be the difference between the proceeds of the sale and the increased basis on the settlement date. Details differ for T-Bills and T-Notes.
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dr350rex
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Re: Buying Treasurys

Post by dr350rex »

MikeG62 wrote: Sat Oct 01, 2022 10:45 am
dr350rex wrote: Fri Sep 30, 2022 2:09 pm Hello, Bogleheads:

I'm trying to remember what I forgot from Finance class so I can understand what I'm doing before I buy Treasurys.

Looking at E*Trade, they have three listings for five-year Treasury Bonds available for purchase. (Sorry but I couldn't figure out how to add an image.)

COUPON MATURITY PRICE YTM YTW
6.125 11/15/2027 108.566 4.247 4.247
6.375 08/15/2027 109.37 4.228 4.228
3.125 08/31/2027 95.344 4.181 4.181

What I'm trying to do is understand the relationships between coupon, price, and yield so as to judge which of these issues I would buy.

In the first two cases, the coupon is higher than the yield, so that's why the price is higher than the bond's par value of 100, yes?

In the latter case, the coupon is lower than the yield, so that's why the price is below the bond's par value of 100, because people would rather buy a bond with a higher coupon and therefore this issue is less attractive?

If I bought $100000 of each issue and held until maturity, can I know that I would I then have $104247, $104228, and $104181 respectively?

Other than a few bucks, what are the relative merits of each of these issues? I guess the first two would be better for people who wanted to maximize semi-annual interest payments - is that right? So if I'm not interested in that, would I be better off with the third even though the yield is a little lower?

Thanks for any tutelage. I have trouble wrapping my head around bonds. Wishing you all health and wealth and happiness.
OP, there can be income tax reporting considerations when purchasing bonds in the secondary market at a discount or a premium. Read this well written article for more info on that.

https://s3.amazonaws.com/static.content ... 969ee5.pdf

In my view it is not a big deal as long as you make a decision as to how to handle the accretion (in the case of bonds bought at a discount) or amortization (in the case of bonds bought at a premium). I've bought many Treasuries at a discount this year and I made the election with my broker to tax the accretion annually. No big deal, but I did need to submit a form.

Setting that aside, I think I would go with the first one - highest yield with a slightly (but not a materially) longer duration. Actually, I think I would leg in since there is no way to know if rates are going higher in the coming months (so some of this bond and keeping some dry powder for future purchases). Others might suggest going all in now and they would not necessarily be wrong. It is a personal choice. I tend to be a dollar cost averager.

Good luck whatever you decide to do.
Thank you. I will read that article. I am like you and considering a ladder.
prozario01
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Re: Buying Treasurys

Post by prozario01 »

FactualFran wrote: Sat Oct 01, 2022 12:02 pm
prozario01 wrote: Fri Sep 30, 2022 8:21 pm If i could piggyback off this thread on a question about tax - in a taxable account, buying in the secondary market. I've Merrill Edge - which only offers to buy in secondary.

1) If I buy a Treasury bill/note - and hold to maturity - it'll be taxed as ordinary income, correct? I pay Fed tax but not sate tax?
2). What i'm a bit confused about - if i don't let it mature and sell it before - does it become cap gain? Basically is it possible to switch the income from interest income to cap gain?
A short answer is that selling before maturity does not switch interest income to cap gain.

In general, the discount in the purchase price accrues over time, is taxed as ordinary income, and increases the basis so that the basis at maturity is equal to the maturity value. At maturity, the capital gain will be zero. Prior to maturity, the capital gain will be the difference between the proceeds of the sale and the increased basis on the settlement date. Details differ for T-Bills and T-Notes.
Thanks - that makes sense.
KNMLHD
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Re: Buying Treasurys

Post by KNMLHD »

I have a general question on mechanics….

I’ve read most of Harry Sit’s article on buying treasuries. Not sure if it matters, but will likely purchase through a new account with a secondary provider - Fido or Vanguard.

If we wanted to effectively build a rolling 6 month series of TBills, buy adding something along the lines of $1k per month until up until we reached something like $5k per month, for 6 sequential months.

Something like…

Month 1 - 6: $1K per month of 6mo TBills
Month 7 - 12: $2k per month of 6mo TBills
Etc until there is $5k per month for 6 months

Would it then be best not to set up auto roll, and just be diligent about remembering to repurchase every month, or is there a way to add to an existing auto roll for the next subsequent purchase?

And presumably, could I then stop the additions and let it keep auto rolling once hit a certain amount?

Edit: Or is the above overly complicated, when there are other (?), simpler methods with similar risk/reward options out there?
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Kevin M
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Re: Buying Treasurys

Post by Kevin M »

Treasury interest is exempt from state and local income tax, so if you are a resident of a state with income tax, your taxable-equivalent yield (TEY) will be higher than the stated interest for a Treasury, but the same as the stated interest for a CD.

You might find these threads useful:

Trading Treasuries (nominal and TIPS)

Taxation of Treasury bills, notes and bonds

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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AnnetteLouisan
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Re: Buying Treasurys

Post by AnnetteLouisan »

Kevin M wrote: Sat Nov 19, 2022 1:26 pm Treasury interest is exempt from state and local income tax, so if you are a resident of a state with income tax, your taxable-equivalent yield (TEY) will be higher than the stated interest for a Treasury, but the same as the stated interest for a CD.

You might find these threads useful:

Trading Treasuries (nominal and TIPS)

Taxation of Treasury bills, notes and bonds

Kevin
Does Treasury Direct send you the form for your taxes telling you how much taxable interest your treasuries shook off in the year? Or do we have to keep track ourselves? With no statements, is it on the website?
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Kevin M
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Re: Buying Treasurys

Post by Kevin M »

^TD does not send out 1099s. You must get it online.
If I make a calculation error, #Cruncher probably will let me know.
FactualFran
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Re: Buying Treasurys

Post by FactualFran »

KNMLHD wrote: Sat Nov 19, 2022 9:45 am Would it then be best not to set up auto roll, and just be diligent about remembering to repurchase every month, or is there a way to add to an existing auto roll for the next subsequent purchase?
In my experience with a Fidelity account, when for a Treasury auction there is an autoroll generated buy and an additional buy, the account ends up with a single position with autoroll, rather than separate positions for each buy order.
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AnnetteLouisan
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Re: Buying Treasurys

Post by AnnetteLouisan »

Kevin M wrote: Sat Nov 19, 2022 1:36 pm ^TD does not send out 1099s. You must get it online.
Thanks.
KNMLHD
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Re: Buying Treasurys

Post by KNMLHD »

FactualFran wrote: Sun Nov 20, 2022 4:17 pm
KNMLHD wrote: Sat Nov 19, 2022 9:45 am Would it then be best not to set up auto roll, and just be diligent about remembering to repurchase every month, or is there a way to add to an existing auto roll for the next subsequent purchase?
In my experience with a Fidelity account, when for a Treasury auction there is an autoroll generated buy and an additional buy, the account ends up with a single position with autoroll, rather than separate positions for each buy order.
Thanks... this is helpful. Will give it a go.
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