How to buy 3 month treasuries

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josephny
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How to buy 3 month treasuries

Post by josephny »

I just bough 3 month treasuries through Morgan Stanley and am confused.

I spent $1,250,414.17, at a price of $98.6909, with a maturity value of $1,267,000.

Reverse engineering the math (because I don't how this is supposed to work), I get:

$100 - $98.6909 = 1.3091

3/12 months means 4 of these in a year for an annual return of $5.2364 (5.2364%)

Alternatively, ($1,267,000 - $1,250,414.17)/$1,250,414.17 = .013264269

4 of these per year yields 5.3057%

So, the calculations don't match each other, and neither matches what I see online as today's rate of 5.378%

https://www.marketwatch.com/investing/B ... tryCode=BX

What am I missing?
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Rocinante Rider
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Re: How to buy 3 month treasuries

Post by Rocinante Rider »

josephny wrote: Thu Jun 06, 2024 3:20 pm $100 - $98.6909 = 1.3091
What am I missing?
Maybe missing the need to divide 1.3091 by 98.6909, then you get the same result and yield as your other calc.
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Chip Munk
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Re: How to buy 3 month treasuries

Post by Chip Munk »

josephny wrote: Thu Jun 06, 2024 3:20 pm I just bough 3 month treasuries through Morgan Stanley and am confused.

I spent $1,250,414.17, at a price of $98.6909, with a maturity value of $1,267,000.

Reverse engineering the math (because I don't how this is supposed to work), I get:

$100 - $98.6909 = 1.3091

3/12 months means 4 of these in a year for an annual return of $5.2364 (5.2364%)

Alternatively, ($1,267,000 - $1,250,414.17)/$1,250,414.17 = .013264269

4 of these per year yields 5.3057%

So, the calculations don't match each other, and neither matches what I see online as today's rate of 5.378%

https://www.marketwatch.com/investing/B ... tryCode=BX

What am I missing?
The calculations are done using the number of days until maturity. Assuming your 3-mo T-Bill matures in 90 days:

((100 / 98.6909) - 1) * (365 / 90) = 0.0537955... which is very close to the 5.378% you listed as today's rate.
p1db
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Re: How to buy 3 month treasuries

Post by p1db »

OP, did you buy the 3 month t-bill at auction or in secondary market? What is the CUSIP?
IDpilot
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Re: How to buy 3 month treasuries

Post by IDpilot »

josephny wrote: Thu Jun 06, 2024 3:20 pm I just bough 3 month treasuries through Morgan Stanley and am confused.

I spent $1,250,414.17, at a price of $98.6909, with a maturity value of $1,267,000.

Reverse engineering the math (because I don't how this is supposed to work), I get:

$100 - $98.6909 = 1.3091

3/12 months means 4 of these in a year for an annual return of $5.2364 (5.2364%)

Alternatively, ($1,267,000 - $1,250,414.17)/$1,250,414.17 = .013264269

4 of these per year yields 5.3057%

So, the calculations don't match each other, and neither matches what I see online as today's rate of 5.378%

https://www.marketwatch.com/investing/B ... tryCode=BX

What am I missing?
Not sure just exactly what you bought today so can't really help you figure it out. There was a three-month T-bill, which is actually a 13 week, issued today but its price was 98.672917 which doesn't match your numbers. Did you, perhaps, buy some treasury note/bond that is three months from maturity?
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Re: How to buy 3 month treasuries

Post by RyeBourbon »

Rocinante Rider wrote: Thu Jun 06, 2024 4:15 pm
josephny wrote: Thu Jun 06, 2024 3:20 pm $100 - $98.6909 = 1.3091
What am I missing?
Maybe missing the need to divide 1.3091 by 98.6909, then you get the same result and yield as your other calc.
This is the answer. They current yield will not match the yield when the bill was bought, but it is close.
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Kevin M
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Re: How to buy 3 month treasuries

Post by Kevin M »

So, you're not asking how to buy them, but how to calculate the yield.

I use the spreadsheet YIELD function. For terms of less than six months, I use freq = 1, but for longer maturities freq = 2. Standard daycountconvention for Treasuries is Actual/365, which is day count convention = 1 with the Google sheets version of YIELD.

The Treasury uses this for short-term Treasury bill calculations:

Image

Source: https://www.treasurydirect.gov/instit/a ... ecbill.pdf
If I make a calculation error, #Cruncher probably will let me know.
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josephny
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Re: How to buy 3 month treasuries

Post by josephny »

Wow, what a tremendous wealth of info here (that's a money pun).

The process I used: I emailed my guy at MS and told him to buy $1.25MM in 3 month treasuries. I suspect I should have provided more specificity, but I don't know exactly what specifics.

The CUSIP they bought for me is 912797GL5 at a price of $98.6909 for a total cost of $1,250,414.17

It shows up online as a quantity of 1,267,000

I looked up 912797GL5 and it looks like this CUSIP is reused every 6 months. Most recently (from what I can tell) on 6/6/2024 where is sold for $98.672917

But, I do not know if I bought the 6/6/2024 issue or the 3/4/2024.

https://www.treasurydirect.gov/auctions ... =912797GL5

Correcting for my math error (thank you!), my cost of $98.6909 results in a 13 week yield of 1.32646% (5.306%).

Math: (100 - 98.6909) / 98.6909 = .0132646

And, doing the math on the entire purchase provides the same (close enough) results:

(1267000 - 1250414.17) / 1250414.17 = .0132643

I am making certain assumptions about rounding to 4 places and what exactly 13 weeks means (13 * 7) and whether multiplying by 4 is the right way to get to an annual yield (13 * 7 * 4 = 354 days).

But, given these assumptions, the numbers work -- anything in the 5.30 and higher is good enough (a phrase I've learned a deeper meaning to, perhaps ironically, on this board).

Am I close?

Nonetheless, thank you all for the deeper understanding: Yield formula and excel function, yields on secondary purchases not matching original issuance yield, 13 weeks is what is meant by 3 months, triple check my math before making a public spectacle of myself, etc.

Thank you!
MrJedi
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Re: How to buy 3 month treasuries

Post by MrJedi »

Annual yield would be a little higher than your estimate of 4x 3 month because annual yield normally includes compound effects. If you buy 3 month bills you can reinvest both the principal and interest, and then compound a few times in a single year. Your calculation ignores reinvesting the new interest with each matured bill.
MGBMartin
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Re: How to buy 3 month treasuries

Post by MGBMartin »

What day did your T-Bill purchase execute on?
I’m having trouble understanding the price you paid versus the auction price.
That T-Bill auction price was 98.672917 and you would of ended up with a yield of 5.365%

I’m thinking MS purchased on open market of a previous issue of that CUSID rather than the reissue at auction on Jun 6.
All moot though if you’re happy with the results.

I use this site to see the auction results…
https://www.treasurydirect.gov/auctions ... a-results/
And this site to keep an eye on the daily yields which gives me an idea of what my next T-Bill will be…
https://home.treasury.gov/resource-cent ... value=2024
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RyeBourbon
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Re: How to buy 3 month treasuries

Post by RyeBourbon »

You didn't buy at auction on 6/3 so that price is irrelevant. You didn't say what day your order was placed, but you got the price at the time. It could have been more or less than Monday's auction price. You got 5.3% which I would be pleased with.
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josephny
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Re: How to buy 3 month treasuries

Post by josephny »

MrJedi wrote: Fri Jun 07, 2024 6:22 am Annual yield would be a little higher than your estimate of 4x 3 month because annual yield normally includes compound effects. If you buy 3 month bills you can reinvest both the principal and interest, and then compound a few times in a single year. Your calculation ignores reinvesting the new interest with each matured bill.
Of course -- duh! Totally forgot about compounding every 3 months.

Thank you for pointing that out.
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josephny
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Re: How to buy 3 month treasuries

Post by josephny »

MGBMartin wrote: Fri Jun 07, 2024 6:32 am What day did your T-Bill purchase execute on?
I’m having trouble understanding the price you paid versus the auction price.
That T-Bill auction price was 98.672917 and you would of ended up with a yield of 5.365%

I’m thinking MS purchased on open market of a previous issue of that CUSID rather than the reissue at auction on Jun 6.
All moot though if you’re happy with the results.

I use this site to see the auction results…
https://www.treasurydirect.gov/auctions ... a-results/
And this site to keep an eye on the daily yields which gives me an idea of what my next T-Bill will be…
https://home.treasury.gov/resource-cent ... value=2024
This is the online record:

"Transaction Date 06/06/24
Activity Date 06/06/24
Settlement Date 06/07/24
Description UNITED STATES TREASURY BILL
RATE: N/A/N/A DUE: 2024-09-05
CUSIP 912797GL5"

I don't know if this helps identify if it was a previous CUSIP or the 6/6/24 CUSIP.

EDITED:
5.365% vs. 5.3% is something to think about -- $500 for the 3 month period is more than enough to keep my wife in coffee every day.
Last edited by josephny on Fri Jun 07, 2024 7:08 am, edited 1 time in total.
RyeBourbon
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Re: How to buy 3 month treasuries

Post by RyeBourbon »

josephny wrote: Fri Jun 07, 2024 6:55 am
MGBMartin wrote: Fri Jun 07, 2024 6:32 am What day did your T-Bill purchase execute on?
I’m having trouble understanding the price you paid versus the auction price.
That T-Bill auction price was 98.672917 and you would of ended up with a yield of 5.365%

I’m thinking MS purchased on open market of a previous issue of that CUSID rather than the reissue at auction on Jun 6.
All moot though if you’re happy with the results.

I use this site to see the auction results…
https://www.treasurydirect.gov/auctions ... a-results/
And this site to keep an eye on the daily yields which gives me an idea of what my next T-Bill will be…
https://home.treasury.gov/resource-cent ... value=2024
This is the online record:

"Transaction Date 06/06/24
Activity Date 06/06/24
Settlement Date 06/07/24
Description UNITED STATES TREASURY BILL
RATE: N/A/N/A DUE: 2024-09-05
CUSIP 912797GL5"

I don't know if this helps identify if it was a previous CUSIP or the 6/6/24 CUSIP.

3.65% vs. 3.5% is something to think about -- $500 for the 3 month period is more than enough to keep my wife in coffee every day.
You got the price on 6/6. The auction was held 6/3, so you couldn't get that price.
https://www.treasurydirect.gov/instit/a ... 0603_2.pdf

If you had placed your order on Monday for the auction, you would have paid $1,250,186, about $228 less than you paid on Thursday (actually paid today as it will settle today). Of course, the price might have fallen between Monday and Thursday and you would have paid less. Treasury prices change constantly and are not predictable. (In fact, I'm surprised it moved so little in three days.) You have to take what you get at the time - no room for buyer's remorse.

I'm not really sure what you are talking about with 3.65% and 3.5% - you got just over 5.3% which I would be happy with.
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Chip Munk
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Re: How to buy 3 month treasuries

Post by Chip Munk »

josephny wrote: Fri Jun 07, 2024 6:05 am The CUSIP they bought for me is 912797GL5 at a price of $98.6909 for a total cost of $1,250,414.17

It shows up online as a quantity of 1,267,000

I looked up 912797GL5 and it looks like this CUSIP is reused every 6 months. Most recently (from what I can tell) on 6/6/2024 where is sold for $98.672917

But, I do not know if I bought the 6/6/2024 issue or the 3/4/2024.
Given the price you paid, I think you bought it on the secondary market, not at the 6/6/2024 auction.
Correcting for my math error (thank you!), my cost of $98.6909 results in a 13 week yield of 1.32646% (5.306%).

Math: (100 - 98.6909) / 98.6909 = .0132646

And, doing the math on the entire purchase provides the same (close enough) results:

(1267000 - 1250414.17) / 1250414.17 = .0132643

I am making certain assumptions about rounding to 4 places and what exactly 13 weeks means (13 * 7) and whether multiplying by 4 is the right way to get to an annual yield (13 * 7 * 4 = 354 days).
As I stated above, the yield calculation is based on the number of days from when your trade settles to the maturity date.

The maturity date for that CUSIP is 09/05/2024. Assume your trade settles today (June 7, 2024). There are 90 days until maturity and the calculations is:

90 Days from settlement to maturity:
(100 - 98.6909) / 98.6909 = .0132646
.0132646 / 90 * 365 = 0.053795

What if it doesn't settle until tomorrow? That's 89 days: 89 days: .0132646 / 89 * 365 = 0.054399

Or maybe it settled yesterday, then you have 91 days until maturity: 91 days: .0132646 / 91 * 365 = 0.053204

ETA: We were posting at the same time. I see you posted that your settlement date is today, June 7, 2024. That's 90 days until maturity so your yield is the first calculation above: 5.3795%.

ETA: If the leap year calculations are still in effect, replace 365 with 366 in the calculations above.
Last edited by Chip Munk on Fri Jun 07, 2024 8:00 am, edited 2 times in total.
Topic Author
josephny
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Re: How to buy 3 month treasuries

Post by josephny »

RyeBourbon wrote: Fri Jun 07, 2024 7:04 am
josephny wrote: Fri Jun 07, 2024 6:55 am
MGBMartin wrote: Fri Jun 07, 2024 6:32 am What day did your T-Bill purchase execute on?
I’m having trouble understanding the price you paid versus the auction price.
That T-Bill auction price was 98.672917 and you would of ended up with a yield of 5.365%

I’m thinking MS purchased on open market of a previous issue of that CUSID rather than the reissue at auction on Jun 6.
All moot though if you’re happy with the results.

I use this site to see the auction results…
https://www.treasurydirect.gov/auctions ... a-results/
And this site to keep an eye on the daily yields which gives me an idea of what my next T-Bill will be…
https://home.treasury.gov/resource-cent ... value=2024
This is the online record:

"Transaction Date 06/06/24
Activity Date 06/06/24
Settlement Date 06/07/24
Description UNITED STATES TREASURY BILL
RATE: N/A/N/A DUE: 2024-09-05
CUSIP 912797GL5"

I don't know if this helps identify if it was a previous CUSIP or the 6/6/24 CUSIP.

3.65% vs. 3.5% is something to think about -- $500 for the 3 month period is more than enough to keep my wife in coffee every day.
You got the price on 6/6. The auction was held 6/3, so you couldn't get that price.
https://www.treasurydirect.gov/instit/a ... 0603_2.pdf

If you had placed your order on Monday for the auction, you would have paid $1,250,186, about $228 less than you paid on Thursday (actually paid today as it will settle today). Of course, the price might have fallen between Monday and Thursday and you would have paid less. Treasury prices change constantly and are not predictable. (In fact, I'm surprised it moved so little in three days.) You have to take what you get at the time - no room for buyer's remorse.

I'm not really sure what you are talking about with 3.65% and 3.5% - you got just over 5.3% which I would be happy with.
Ugh -- messing up the numbers in my head. I edited for correction.

6/3 auction explains it all. Thank you.

Yes, great lesson 5.3% is good and I should be (and am) happy with that.
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PizzaEater
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Re: How to buy 3 month treasuries

Post by PizzaEater »

josephny wrote: Fri Jun 07, 2024 6:55 am
This is the online record:

"Transaction Date 06/06/24
Activity Date 06/06/24
Settlement Date 06/07/24
Description UNITED STATES TREASURY BILL
RATE: N/A/N/A DUE: 2024-09-05
CUSIP 912797GL5"

I don't know if this helps identify if it was a previous CUSIP or the 6/6/24 CUSIP.
A bill with the same CUSIP is the same bill. The price (on the market) changes every day, just like a stock price would. A 4-week Bill at auction reuses the same CUSIP from an 8-week bill issued 4 weeks earlier at auction, because they have the same maturity date. They're the same bill, just auctioned at different times. Because they are auctioned at different times they will have a different price. So the statement "I don't know if this helps identify if it was a previous CUSIP or the 6/6/24 CUSIP" is meaningless.

For example, look at the auction results for this 8-week bill:
https://treasurydirect.gov/instit/annce ... 0509_2.pdf

and this 4-week bill:
https://treasurydirect.gov/instit/annce ... 0606_2.pdf

Same maturity date, same CUSIP, but different issue date and different price. They are the same bill. A bill's price will change every day, converging to 100.0 at maturity. Auctions are special in that everybody gets the same price, whereas on the market you need a buyer and seller to agree on a price for each transaction. However, auction prices are extremely close to market prices around the same date (as others have already mentioned).

Implementation detail: For my T-Bills I only enter prices when I buy (and of course when they mature), so prices rarely get updated in my financial tracking software. This means my present-day net worth is a little off, since I don't update T-Bill prices every day. I haven't found an easy way to import historical prices, so I don't bother. Historical prices are available (https://www.treasurydirect.gov/GA-FI/Fe ... riceDetail), but that's too clumsy to grab prices for every day.
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Re: How to buy 3 month treasuries

Post by RyeBourbon »

PizzaEater wrote: Fri Jun 07, 2024 7:23 am
josephny wrote: Fri Jun 07, 2024 6:55 am
This is the online record:

"Transaction Date 06/06/24
Activity Date 06/06/24
Settlement Date 06/07/24
Description UNITED STATES TREASURY BILL
RATE: N/A/N/A DUE: 2024-09-05
CUSIP 912797GL5"

I don't know if this helps identify if it was a previous CUSIP or the 6/6/24 CUSIP.
A bill with the same CUSIP is the same bill. The price (on the market) changes every day, just like a stock price would. A 4-week Bill at auction reuses the same CUSIP from an 8-week bill issued 4 weeks earlier at auction, because they have the same maturity date. They're the same bill, just auctioned at different times. Because they are auctioned at different times they will have a different price. So the statement "I don't know if this helps identify if it was a previous CUSIP or the 6/6/24 CUSIP" is meaningless.

For example, look at the auction results for this 8-week bill:
https://treasurydirect.gov/instit/annce ... 0509_2.pdf

and this 4-week bill:
https://treasurydirect.gov/instit/annce ... 0606_2.pdf

Same maturity date, same CUSIP, but different issue date and different price. They are the same bill. A bill's price will change every day, converging to 100.0 at maturity. Auctions are special in that everybody gets the same price, whereas on the market you need a buyer and seller to agree on a price for each transaction. However, auction prices are extremely close to market prices around the same date (as others have already mentioned).

Implementation detail: For my T-Bills I only enter prices when I buy (and of course when they mature), so prices rarely get updated in my financial tracking software. This means my present-day net worth is a little off, since I don't update T-Bill prices every day. I haven't found an easy way to import historical prices, so I don't bother. Historical prices are available (https://www.treasurydirect.gov/GA-FI/Fe ... riceDetail), but that's too clumsy to grab prices for every day.
Great explanation.

OP, I wouldn't worry over a few hundred dollars on a 7 figure buy. As I said, you just as easily could have gotten an extra $500 a couple days after the auction.

It's really impossible to know where rates are going on a day-to-day basis, but I felt good when I bought some long-term bonds last week when yields spiked. I was going to buy them anyway, so I would have been happy with the price I was originally looking at, but I ended up spending $8000 less than I thought I was going to.
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IDpilot
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Re: How to buy 3 month treasuries

Post by IDpilot »

Chip Munk wrote: Fri Jun 07, 2024 7:05 am
josephny wrote: Fri Jun 07, 2024 6:05 am The CUSIP they bought for me is 912797GL5 at a price of $98.6909 for a total cost of $1,250,414.17

It shows up online as a quantity of 1,267,000

I looked up 912797GL5 and it looks like this CUSIP is reused every 6 months. Most recently (from what I can tell) on 6/6/2024 where is sold for $98.672917

But, I do not know if I bought the 6/6/2024 issue or the 3/4/2024.
Given the price you paid, I think you bought it on the secondary market, not at the 6/6/2024 auction.
Correcting for my math error (thank you!), my cost of $98.6909 results in a 13 week yield of 1.32646% (5.306%).

Math: (100 - 98.6909) / 98.6909 = .0132646

And, doing the math on the entire purchase provides the same (close enough) results:

(1267000 - 1250414.17) / 1250414.17 = .0132643

I am making certain assumptions about rounding to 4 places and what exactly 13 weeks means (13 * 7) and whether multiplying by 4 is the right way to get to an annual yield (13 * 7 * 4 = 354 days).
As I stated above, the yield calculation is based on the number of days from when your trade settles to the maturity date.

The maturity date for that CUSIP is 09/05/2024. Assume your trade settles today (June 7, 2024). There are 90 days until maturity and the calculations is:

90 Days from settlement to maturity:
(100 - 98.6909) / 98.6909 = .0132646
.0132646 / 90 * 365 = 0.053795

What if it doesn't settle until tomorrow? That's 89 days: 89 days: .0132646 / 89 * 365 = 0.054399

Or maybe it settled yesterday, then you have 91 days until maturity: 91 days: .0132646 / 91 * 365 = 0.053204

ETA: We were posting at the same time. I see you posted that your settlement date is today, June 7, 2024. That's 90 days until maturity so your yield is the first calculation above: 5.3795%.

ETA: If the leap year calculations are still in effect, replace 365 with 366 in the calculations above.
The decision on when to use 365 or 366 is based on the number of days in the year following the issue date of the original bill. Since CUSIP 912797GL5 was originally issued on 5/9/2024, 365 is the correct number.
FactualFran
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Re: How to buy 3 month treasuries

Post by FactualFran »

josephny wrote: Fri Jun 07, 2024 6:05 am The process I used: I emailed my guy at MS and told him to buy $1.25MM in 3 month treasuries. I suspect I should have provided more specificity, but I don't know exactly what specifics.
Based on other posts, some of the specifics are:
  • The transaction was a trade on the secondary market, not a purchase at auction.
  • The trade date was the same day as the settlement date of an auction of 91-day Bills.
  • The maturity date of the Bills is 90 days after the settlement date of the trade.
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josephny
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Re: How to buy 3 month treasuries

Post by josephny »

Thank you all so much for the crash course in bills!

I don't understand how one can buy a bill on the secondary market (for example, one that was auctioned by the govt at an earlier date) and still be able to hold it for 90 (or 91) days? In my example, I bought the bill on 6/6/24 that was sold at govt auction on 3/6/2024, and yet the bill I have has a maturity date of 9/5/2024. Maybe "maturity" doesn't mean what I think it means.
Geologist
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Re: How to buy 3 month treasuries

Post by Geologist »

josephny wrote: Sat Jun 08, 2024 6:14 pm Thank you all so much for the crash course in bills!

I don't understand how one can buy a bill on the secondary market (for example, one that was auctioned by the govt at an earlier date) and still be able to hold it for 90 (or 91) days? In my example, I bought the bill on 6/6/24 that was sold at govt auction on 3/6/2024, and yet the bill I have has a maturity date of 9/5/2024. Maybe "maturity" doesn't mean what I think it means.
The Treasury issues bills at a range of maturities from 4 weeks up to 52 weeks. Consequently, it is not difficult to buy a bill on the secondary market that has roughly a 3-month maturity but was issued at an earlier time (perhaps with 26 or 52 week original maturity).

Edit: your auction date isn't quite right. It was a 26-week bill auctioned on 3/4/24 (see https://www.treasurydirect.gov/instit/a ... 0304_1.pdf) and issued on 3/7/24.
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Chip Munk
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Re: How to buy 3 month treasuries

Post by Chip Munk »

josephny wrote: Sat Jun 08, 2024 6:14 pm Thank you all so much for the crash course in bills!

I don't understand how one can buy a bill on the secondary market (for example, one that was auctioned by the govt at an earlier date) and still be able to hold it for 90 (or 91) days? In my example, I bought the bill on 6/6/24 that was sold at govt auction on 3/6/2024, and yet the bill I have has a maturity date of 9/5/2024. Maybe "maturity" doesn't mean what I think it means.
That particular T-Bill (CUSIP 912797GL5 with a maturity date of 09/05/2024) has been offered at auction three times: 1) in Sep 2023 as a 52-week T-Bill, 2) in Mar 2024 as a 26-wk T-Bill, and 3) in June 2024 as a 13-wk T-Bill. https://www.treasurydirect.gov/auctions ... =912797GL5 The ones you bought were originally purchased at auction in either Sep 2023 or Mar 2024.

To keep things simple, assume you bought this T-Bill from the original owner (i.e., they bought at auction and not on the secondary market). It could have been purchased in either Sep 2023 for $94.823111 or Mar 2024 for $97.419139. You bought it from that owner at a price of $98.6909. So the owner made some money by selling it to you for more than they paid, and you will make money when it matures and are paid $100 by the US Treasury on Sep 5, 2024, 90 days after you bought it.
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Chip Munk
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Re: How to buy 3 month treasuries

Post by Chip Munk »

You might find this article by Harry Sit ("The Finance Buff") helpful. "How to Buy Treasury Bills & Notes On the Secondary Market" https://thefinancebuff.com/buy-treasury ... arket.html

It is a follow on to an article he published earlier: "How To Buy Treasury Bills & Notes Without Fee at Online Brokers" https://thefinancebuff.com/treasury-bil ... arket.html
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josephny
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Re: How to buy 3 month treasuries

Post by josephny »

Geologist wrote: Sat Jun 08, 2024 6:55 pm
josephny wrote: Sat Jun 08, 2024 6:14 pm Thank you all so much for the crash course in bills!

I don't understand how one can buy a bill on the secondary market (for example, one that was auctioned by the govt at an earlier date) and still be able to hold it for 90 (or 91) days? In my example, I bought the bill on 6/6/24 that was sold at govt auction on 3/6/2024, and yet the bill I have has a maturity date of 9/5/2024. Maybe "maturity" doesn't mean what I think it means.
The Treasury issues bills at a range of maturities from 4 weeks up to 52 weeks. Consequently, it is not difficult to buy a bill on the secondary market that has roughly a 3-month maturity but was issued at an earlier time (perhaps with 26 or 52 week original maturity).

Edit: your auction date isn't quite right. It was a 26-week bill auctioned on 3/4/24 (see https://www.treasurydirect.gov/instit/a ... 0304_1.pdf) and issued on 3/7/24.
I see -- so I might have bought a bill that was 13 weeks old (since the original auction date) that was originally auctioned as a 26 week bill?

And are they are auctioned frequently enough so I can pick any trading day to buy any length note on the secondary market at any of the origal lengths?
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josephny
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Re: How to buy 3 month treasuries

Post by josephny »

Chip Munk wrote: Sat Jun 08, 2024 7:04 pm
josephny wrote: Sat Jun 08, 2024 6:14 pm Thank you all so much for the crash course in bills!

I don't understand how one can buy a bill on the secondary market (for example, one that was auctioned by the govt at an earlier date) and still be able to hold it for 90 (or 91) days? In my example, I bought the bill on 6/6/24 that was sold at govt auction on 3/6/2024, and yet the bill I have has a maturity date of 9/5/2024. Maybe "maturity" doesn't mean what I think it means.
That particular T-Bill (CUSIP 912797GL5 with a maturity date of 09/05/2024) has been offered at auction three times: 1) in Sep 2023 as a 52-week T-Bill, 2) in Mar 2024 as a 26-wk T-Bill, and 3) in June 2024 as a 13-wk T-Bill. https://www.treasurydirect.gov/auctions ... =912797GL5 The ones you bought were originally purchased at auction in either Sep 2023 or Mar 2024.

To keep things simple, assume you bought this T-Bill from the original owner (i.e., they bought at auction and not on the secondary market). It could have been purchased in either Sep 2023 for $94.823111 or Mar 2024 for $97.419139. You bought it from that owner at a price of $98.6909. So the owner made some money by selling it to you for more than they paid, and you will make money when it matures and are paid $100 by the US Treasury on Sep 5, 2024, 90 days after you bought it.
So the CUSIP alone does not tell us the original auction date or the original maturity date (and therefore the time length of the bill)?

Fascinating stuff!
Frugalmen
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Re: How to buy 3 month treasuries

Post by Frugalmen »


So the CUSIP alone does not tell us the original auction date or the original maturity date (and therefore the time length of the bill)?

Fascinating stuff!
Not true, An internet search on the term "912797GL5 T-bill" will yield a few results:

https://www.treasurydirect.gov/instit/a ... 0603_2.pdf
and
https://www.treasurydirect.gov/auctions ... =912797GL5

Here is some info:
Original Auction = 1-year T-bill
Original Auction date = 9/5/23
Original Issue = 9/7/23

The Maturity date is always static. In this case it was always going to mature on 9/5/24.
Treasurydirect.gov is your best friend / main resource when you researching treasuries.

Something to think about after this T-bill matures. If you do not need the money in all one lump sum, think about a treasury ladder. Break-up the cash into 3 rungs say (416K on a 4week t-bill, 415K on a 8week t-bill, and 415K on a 13week) This way you'll have something maturing every month and also take advantage of rates should it increase. BTW, you can sell these t-bills anytime you want and still realize the interest gain as interest is calculated daily. There is so much more...but I will not bore you with it for now.

OH what Fun!
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Chip Munk
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Re: How to buy 3 month treasuries

Post by Chip Munk »

josephny wrote: Mon Jun 10, 2024 3:43 am
Chip Munk wrote: Sat Jun 08, 2024 7:04 pm That particular T-Bill (CUSIP 912797GL5 with a maturity date of 09/05/2024) has been offered at auction three times: 1) in Sep 2023 as a 52-week T-Bill, 2) in Mar 2024 as a 26-wk T-Bill, and 3) in June 2024 as a 13-wk T-Bill. https://www.treasurydirect.gov/auctions ... =912797GL5 The ones you bought were originally purchased at auction in either Sep 2023 or Mar 2024.

To keep things simple, assume you bought this T-Bill from the original owner (i.e., they bought at auction and not on the secondary market). It could have been purchased in either Sep 2023 for $94.823111 or Mar 2024 for $97.419139. You bought it from that owner at a price of $98.6909. So the owner made some money by selling it to you for more than they paid, and you will make money when it matures and are paid $100 by the US Treasury on Sep 5, 2024, 90 days after you bought it.
So the CUSIP alone does not tell us the original auction date or the original maturity date (and therefore the time length of the bill)?

Fascinating stuff!
Bills with the same CUSIP have the same maturity date. As stated above, this particular T-Bill -- CUSIP 912797GL5 has a maturity date of 09/05/2024. The Treasury has auctioned this particular T-Bill three times, but at auctions #2 and #3, there was less time remaining until the maturity date so while it was a 52-week bill the first time it was auctioned (Sep 2023), it was a 26-week bill the second time it was auctioned (six months later in Mar 2023) and a 13-week bill the third time it was auctioned (in Jun 2024) because that was the amount of time left until that fixed maturity date. Same CUSIP, same maturity date.
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