T Bills

[Fearchar]

Curious to know if other have T Bill ladders; this is new to me.

Open Market vs Auctions?

Open Market right now for T Bills
3 Month 4.381%
6 Month 4.612%
9 Month 4.670%
1 Year    4.703%
2 Year    4.492%

So, sweet spot is 1 year out.
But rates are set to rise (maybe 0.5%).
So, 3 Months may take a step up latter Dec 13-14 meeting and maybe a bit more after that.

Next auction date for 3 & 6 months and 1 Yr is Nov 23rd.

Does the Auction date really mean much to an individual?

[yogibearbull]

T-Bill auctions have become popular and are beating m-mkt funds. T-Bills/Notes (highly liquid) are also competitive with brokered CDs (illiquid).

One can set up 13-, 26- , 39- , 52- wk T-Bill ladder right away by buying T-Bills in the secondary market at brokerages. There are tiny bid-ask spreads but no commissions at major brokerages. Then, each maturing T-Bill can be rolled over into 52-wk T-Bill.

Retail investors prefer buying Treasuries at auctions (see schedule below). There are no bid-ask, and EVERYONE gets the same clearing price at the auction ($1K or $10 million buyer). Fido and Schwab also allow auto-rolls.

The next 52-wk T-Bill auction will be on November 29 (not on November 23).

See Treasury Auction Schedule, home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf

[Fearchar]

3 Mo Treasury 4.420%
6 Mo Treasury 4.642%
9 Mo Treasury 4.732%
1 Yr  Treasury 4.774%

5  Yr Agency 5.800%
10Yr Agency 5.367%

[newtecher]

Nov 19, 2022 12:56:36 GMT yogibearbull said:

 There are tiny bid-ask spreads but no commissions at major brokerages. 

So I go curious and took a look at the treasury quotes at E-Trade. The spreads seem to be 0.1-0.2%. I would not call these tiny at all. It is nice that you do not have to pay additional 0.1% commission for treasuries but still, the comparison to ETFs is not favorable. The spreads in high-priced (>50$ per share) and liquid ETFs is often just one cent, so only a few basis points, or several times less than for individual treasury bills or bonds. No commision for most ETFs as well.

Do other brokerages have smaller spread or is a weekend a bad time to look at them?

[yogibearbull]

Bid-ask spreads when markets are closed are not reliable or meaningful. At some brokers, secondary tabs for Treasuries are even inoperative on weekends - only permissible Auction orders can be placed. Check Treasury secondary bid-ask again during the market hours.

[newtecher]

Yes, thank you. Now that the markets are open, it looks like it is about 5 basis points for regular treasuries but still 10-20 basis points (0.1-0.2%) for TIPs