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Post by mozart522 on Sept 13, 2022 19:32:13 GMT
oceanpatter, bizman, "Edited to add: Reminded by fishingrod ,'s post below, you can avoid much or all of my baloney above by simply buying Treasuries through Treasury Direct at auction. Then you may have de minimus OID, but not market discounts or premiums to mess with." Or even simpler, buy at auction through most brokerage accounts. Treasury Direct makes it difficult to change redemption locations.
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Post by mozart522 on Sept 16, 2022 13:38:14 GMT
Just bought a 6-month T-Bill at 3.8% Indicatve Yield.
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Post by marquay on Sept 16, 2022 15:24:59 GMT
Fidelity shows 6 months T bill Indicative yield 3.549? Why? which brokerage is correct?
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Post by Deleted on Sept 16, 2022 15:41:37 GMT
Fidelity shows 6 months T bill Indicative yield 3.549? Why? which brokerage is correct? The Markets page on the Fidelity app shows the 6 month T Bill at 3.79%. |
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Post by oceanpatter on Sept 16, 2022 15:44:43 GMT
Thanks for your comments, bizman and mozart 522. By the way, FHLB's (Federal Home Loan Bank) 4-year security is at 5.0%.
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Post by retiredat48 on Sept 16, 2022 20:20:33 GMT
For those so inclined...I still consider the two year bonds are the sweet spot of bond investing currently. Some notes:
--Gundlach supports this, and is also getting bullish on 30 yr treasury bonds.
--4% bond yields do wonders for portfolio stock/bond allocations. Watch for huge buying of anything hitting at or near 4%.
--I am restructuring my younger brother's retirement portfolio from mostly growth stock funds. In Jan we began exiting same. Now redeploying. He needs 3% from portfolio to live on. We will be buying (more) 2 yr and perhaps longer dated t-bonds soon, as part of allocation. Then some SCHD and HDV also---waiting for now.
--I previously posted success in buying such bonds the day before fed announced its rate increase. (On day of increase, and thereafter, bond prices rallied). I expect same again, and will likely buy the day before fed announcement.
--TV's Jim Cramer stated he cannot buy stocks (restrictions??) and is now loading up on 2 yr treasuries. He consider current yield too high, and cannot hold. Or, at least a competitive bargain vis-a-vis stocks, at these yields. Stocks not the only game in town anymore!
R48
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Post by FD1000 on Sept 16, 2022 22:15:13 GMT
For those so inclined...I still consider the two year bonds are the sweet spot of bond investing currently. Some notes: --Gundlach supports this, and is also getting bullish on 30 yr treasury bonds. --4% bond yields do wonders for portfolio stock/bond allocations. Watch for huge buying of anything hitting at or near 4%. --I am restructuring my younger brother's retirement portfolio from mostly growth stock funds. In Jan we began exiting same. Now redeploying. He needs 3% from portfolio to live on. We will be buying (more) 2 yr and perhaps longer dated t-bonds soon, as part of allocation. Then some SCHD and HDV also---waiting for now. --I previously posted success in buying such bonds the day before fed announced its rate increase. (On day of increase, and thereafter, bond prices rallied). I expect same again, and will likely buy the day before fed announcement. --TV's Jim Cramer stated he cannot buy stocks (restrictions??) and is now loading up on 2 yr treasuries. He consider current yield too high, and cannot hold. Or, at least a competitive bargain vis-a-vis stocks, at these yields. Stocks not the only game in town anymore! R48 Haven't we learned a lesson already? See attach below, what Treasuries are GUARANTEE to pay on an annual basis + no state tax. The 6-9-12-24 treasury pay is higher than VGSH 30 day sec yield at 3.45%...if you hold for 2 years and the 3.45% isn't a guarantee. If you take last month dividends and multiply by 12, VGSH pays about 1.2% annually.
Why anybody should own VGSH, when the guaranteed bird in the hand, treasuries, pay out more?
You also told us that VGSH will make you 3% within 6 months. The chart below shows that anybody who bought in the in March-April-May lost over 1%. Even if you bought at the bottom in June, you still lost.Attachments:
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Post by mozart522 on Sept 16, 2022 23:02:15 GMT
retiredat48, Why would I tie my money up for 2 years at 3.9% when I can get 6 month t-bills at 3.8% Why would I bet that a 2 year note bought today will have a higher yield than a 3 or 6 month t-bill even a month or two from now. The FED is going to raise another 1.5% minimum Those stuck with 2 year notes will either have to get less than they could have or sell at a loss to get higher 2 year yields. You keep calling the 2 year the sweet spot but offer no real reason why except some name dropping. Take Cramer: "CNBC’s Jim Cramer told his Investing Club members Thursday that he personally bought 2-year Treasury notes — because for the first time in a really long time, the yields are more competitive with stock returns, especially when factoring in the risk-free nature of government-backed bonds." Sure, so are 3 month and 6 month and 1 year returns, all of which will likely be higher than the current 2 year yield of 3.9? Why is it the sweet spot.?
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Post by retiredat48 on Sept 17, 2022 6:00:12 GMT
retiredat48 , Why would I tie my money up for 2 years at 3.9% when I can get 6 month t-bills at 3.8% Why would I bet that a 2 year note bought today will have a higher yield than a 3 or 6 month t-bill even a month or two from now. The FED is going to raise another 1.5% minimum Those stuck with 2 year notes will either have to get less than they could have or sell at a loss to get higher 2 year yields. You keep calling the 2 year the sweet spot but offer no real reason why except some name dropping. Take Cramer: "CNBC’s Jim Cramer told his Investing Club members Thursday that he personally bought 2-year Treasury notes — because for the first time in a really long time, the yields are more competitive with stock returns, especially when factoring in the risk-free nature of government-backed bonds." Sure, so are 3 month and 6 month and 1 year returns, all of which will likely be higher than the current 2 year yield of 3.9? Why is it the sweet spot.? Fair question. It's the sweet spot because the 2 yr bond will fluctuate more around a mean rate, than a 6 month bond. Therein creates opportunity. Yes, it seems we had to add another 25 bps to what will be a mean rate soon. Like, I expect the 2 yr to fluctuate between 4% peak and 3.25%. It is at those times of lower yields one can choose to exit if you like at a cap gain plus interest. You don't have to tie up your money for two years. One will likely never sell at a nominal "loss." So if opportunities come (like re-entering the stock market), sell and reinvest in them. The total return fluctuation of a 2 yr bond will probably equal the fluctuation of one day in the stock market. Price fluctuations are so small that I hardly ever notice or check 2 yr treasury or corp bond funds I may own. Chump change to me. It is simply a place to park money while I wait. The real wait is to return cash to the bond market with longer maturities; we are getting closer and closer to where the 10 yr or more bonds are good investments for retiree portfolios. Yield curve now inverted; will get back to normal either by long bonds going up in yields, or shorter term rates dropping. Either way, it will happen. That will create the opportunity. Gains on the short term, or opportunities to invest on the longer duration. BTW don't count your chickens that the fed will get to 4% on funds rate. Economy seems to be cratering...fast. Huge dislocations underway. If they do , it will likley, IMO, be another fed mistake; which we know they are very capable of doing. What they should not do is hire another 25 Economists with PHD degrees, to go along with the couple hundred now on staff! Useless to have this many, and make such policy errors. The past is poor for Powell; hope fed is smarter this time, but they are treating "hawkishness" like a he-man, tough guy game, when livelihoods are being affected. The game plan should be: Go up 75 bp next week; then pause for a long time...assess inflation trends. Don't lower rates unless disaster. If inflation EVER turns upward, increase rates some more. Rinse and repeat. R48 |
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Post by retiredat48 on Sept 17, 2022 6:05:31 GMT
To FD1000 ,...I didn't say/post had to buy VGSH...I said 2 yr treasury bonds. I may be buying individual treasury bonds this time...likely tuesday. R48 |
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Post by mozart522 on Sept 17, 2022 16:05:34 GMT
retiredat48, One issue of concern is the doubling of the treasury runoff by the FED. This can cause liquidity issues in the treasury market which leads to big yield swings and increase the bid/ask spreads for those wanting to sell early. This makes it far less advantageous to tie up money for 2-5 years at the same rate as 6 months, and think it will be easy to get out early. As for FED rate hikes, many of the opinions about FED slowdown here seem to be what one wishes to happen rather than what is likely to happen. I don't see the economy cratering as much as the stock market cratering. A cratering economy will quickly show up in a decline in employment numbers. The FED doesn't care about the stock and bond market. It will continue to raise rates until inflation is clearly under control. The pain they promised is not .75 and halt, IMHO.
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Post by FD1000 on Sept 17, 2022 20:53:20 GMT
To FD1000 ,...I didn't say/post had to buy VGSH...I said 2 yr treasury bonds. I may be buying individual treasury bonds this time...likely tuesday. R48 If you look at my attachment, you can see that one year pays more than 2-5-10 years. That's the sweet spot. |
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Post by retiredat48 on Sept 18, 2022 17:03:31 GMT
To FD1000 ,...I didn't say/post had to buy VGSH...I said 2 yr treasury bonds. I may be buying individual treasury bonds this time...likely tuesday. R48 If you look at my attachment, you can see that one year pays more than 2-5-10 years. That's the sweet spot. But you only get it for one year. A year from now rates may be way down. By going two years one gets a very good rate (often exceeding one year) and you get it for longer. Going out further gets one into the risk of rate rises and larger NAV price declines. Soon I expect you to be telling us what 5 or 10 year treasury or corp bond fund is a good buy! I am patient...will listen. R48 |
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Post by FD1000 on Sept 18, 2022 17:33:10 GMT
If you look at my attachment, you can see that one year pays more than 2-5-10 years. That's the sweet spot. But you only get it for one year. A year from now rates may be way down. By going two years one gets a very good rate (often exceeding one year) and you get it for longer. Going out further gets one into the risk of rate rises and larger NAV price declines. Soon I expect you to be telling us what 5 or 10 year treasury or corp bond fund is a good buy! I am patient...will listen. R48 Good point about the 2 years. I may post at some point, maybe not  . I bought several times YTD, twice making nicely, others I sold immediately, losing very little when I see any weakness. Observation: This is still a tricky market, I haven't seen since 2008-9. Since 2010, tricky markets were shorter. We are now already in the ninth month and I still don't see any clear direction uptrend. Patience is a must. |
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Post by mozart522 on Sept 18, 2022 23:08:24 GMT
If you look at my attachment, you can see that one year pays more than 2-5-10 years. That's the sweet spot. But you only get it for one year. A year from now rates may be way down. By going two years one gets a very good rate (often exceeding one year) and you get it for longer. Going out further gets one into the risk of rate rises and larger NAV price declines. Soon I expect you to be telling us what 5 or 10 year treasury or corp bond fund is a good buy! I am patient...will listen. R48 Which is why 3.8% for the 6 month T-Bill is actually the sweet spot. As the Fed raises continue, the 2 year yield will continue to go up also. You may remember that you were the one who said the 2 year follows the FED, and even provided a chart. At some point, the 2 year or maybe the 5 year will be the sweet spot. But it isn't now. Well unless one believes in .75% hike and then halt. In any event, it is just a gamble, but I like the 6 month when I am only getting 10 bp or so for going out another 1 1/2 years. |
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Post by retiredat48 on Sept 19, 2022 4:20:35 GMT
But you only get it for one year. A year from now rates may be way down. By going two years one gets a very good rate (often exceeding one year) and you get it for longer. Going out further gets one into the risk of rate rises and larger NAV price declines. Soon I expect you to be telling us what 5 or 10 year treasury or corp bond fund is a good buy! I am patient...will listen. R48 Which is why 3.8% for the 6 month T-Bill is actually the sweet spot. As the Fed raises continue, the 2 year yield will continue to go up also. You may remember that you were the one who said the 2 year follows the FED, and even provided a chart. At some point, the 2 year or maybe the 5 year will be the sweet spot. But it isn't now. Well unless one believes in .75% hike and then halt. In any event, it is just a gamble, but I like the 6 month when I am only getting 10 bp or so for going out another 1 1/2 years. ,...you may well be correct; maybe the 6 months is the sweet spot. But we are only talking a few basis points in total return. Either should do OK. The key is that one not go too far out the maturity curve lest you find yourself losing to NAV downturns. For me, I like to have a cadre of guru's who support the same. In this regard I see more supporting the 2 year as the sweet spot. Such as Cramer, Gundlach, and a few others. Cramer a recent convert. Final factor...I consider the demand will be huge for any maturity that gets to 4% yield. REtirees will be rushing to buy. Thus I view 4% may be a ceilng for several many months. It will also compete well with stocks. R48 |
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Post by marquay on Sept 19, 2022 16:19:36 GMT
Django,
May I ask what is Fidelity App? Thank you.
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Post by Deleted on Sept 19, 2022 17:55:57 GMT
What is the pros and cons of buying on 1-2 year treasury bills on Auction vs on Secondary Market?
I see yield on 1 yr treasury (originally 2 year treasury) around 4% on secondary market.
I see in secondary market the 1 yr to maturity treasury (originally 2 year treasury) are selling for like $97 but actual coupon is only .125 %.
So people are selling at loss?
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Post by Deleted on Sept 19, 2022 18:26:46 GMT
Django, May I ask what is Fidelity App? Thank you. The Fidelity software application for smart phones. |
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Post by Deleted on Sept 19, 2022 19:37:19 GMT
Also treasuries have federal tax but no state and local tax.
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Post by marquay on Sept 19, 2022 20:04:46 GMT
It seems Fidelity does not update their website T Bill auction rate daily if there's any change.
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Post by Deleted on Sept 19, 2022 20:47:54 GMT
if I buy treasuries in secondary market say for $97, so $3 gain I get at the maturity will be capital gains and not interest income and would be taxed so by federal if it matures after 1 year. Is that correct?
There will be no state tax.
I have never bought treasuries before.
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Post by mozart522 on Sept 19, 2022 21:32:29 GMT
What is the pros and cons of buying on 1-2 year treasury bills on Auction vs on Secondary Market? I see yield on 1 yr treasury (originally 2 year treasury) around 4% on secondary market. I see in secondary market the 1 yr to maturity treasury (originally 2 year treasury) are selling for like $97 but actual coupon is only .125 %. So people are selling at loss? Pros are you can buy a 2 year treasury bond with only one year to go; you cant do that at auction Cons are the bid ask spreads can get wide, especially when liquidity dries up. Some feel the the coming run off by the Treasury could cause a liquidity issue. I'm sure there is a lot more pros and cons but I only buy at auction through Vanguard |
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Post by oceanpatter on Sept 19, 2022 22:31:02 GMT
if I buy treasuries in secondary market say for $97, so $3 gain I get at the maturity will be capital gains and not interest income and would be taxed so by federal if it matures after 1 year. Is that correct? There will be no state tax. I have never bought treasuries before. This actually was my question, as well. On Schwab, all the T-bills for a given duration (for example) are sorted by yield-to-maturity. So why wouldn't you always choose the security with the highest ytm? I guess the answer lies in the different tax consequences of the discount (capital gains at maturity, as you state it) vs. the interest income.
Do BOTH the capital gains at maturity AND the interest income have the same federal/state tax treatment? If so, why does it matter where your 'gains' come from?
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Post by anitya on Sept 19, 2022 22:47:17 GMT
Income (but not capital gains) from Treasuries is exempt from state income tax. Somebody else can address how to convert market discount into capital gain.
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Post by Deleted on Sept 19, 2022 23:19:51 GMT
if I buy treasuries in secondary market say for $97, so $3 gain I get at the maturity will be capital gains and not interest income and would be taxed so by federal if it matures after 1 year. Is that correct? There will be no state tax. I have never bought treasuries before. I believe that the $3 gain would be taxed as ordinary income. The brokerage would classify it as 'interest' on the 1099-B. |
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Post by liftlock on Sept 20, 2022 14:02:39 GMT
if I buy treasuries in secondary market say for $97, so $3 gain I get at the maturity will be capital gains and not interest income and would be taxed so by federal if it matures after 1 year. Is that correct? There will be no state tax. I have never bought treasuries before. I believe that the $3 gain would be taxed as ordinary income. The brokerage would classify it as 'interest' on the 1099-B. Any capital gain on a bond would be taxed as a long term capital gain if held for more than 1 year. Any portion of the gain that is coupon interest would be taxed as interest income. www.investopedia.com/articles/tax/08/bond-tax.asp |
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Post by Chahta on Sept 20, 2022 14:33:47 GMT
Sounds like the difference is whether it is purchased in taxable or tax deferred accounts.
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Post by fishingrod on Sept 20, 2022 15:18:17 GMT
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Post by Deleted on Sept 20, 2022 21:47:28 GMT
I came across another kind of treasury bills - Zero Coupon. As per internet they should be bought in tax deferred accounts.
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. I bought several times YTD, twice making nicely, others I sold immediately, losing very little when I see any weakness. 
