{"id":4583,"date":"2022-12-04T14:45:13","date_gmt":"2022-12-04T19:45:13","guid":{"rendered":"https:\/\/www.fiveforks.com\/ted\/?p=4583"},"modified":"2023-12-11T14:27:07","modified_gmt":"2023-12-11T19:27:07","slug":"t-bills","status":"publish","type":"post","link":"https:\/\/www.fiveforks.com\/ted\/2022\/12\/t-bills\/","title":{"rendered":"T Bills"},"content":{"rendered":"

Although I have bought Savings Bonds a few times, I have never bought Treasury Bills or Treasury Bonds before. The bills are short-term notes of 1 year or less (4, 8, 13, 17, 26, and 52 weeks being the most common). Treasury Bonds are long term: 10 or 20 years. Treasury Notes are in between (2, 3, 5, 7, or 10 years, with the 10 year note being the one that commercial mortgage rates are based on). Usually the yield on the bills has been so low it isn’t really worth bothering with. I could get about as much with a CD or money market. I have a savings account right now earning 3%. Nothing can compare to the Series I Savings bonds I have which are getting 9.6% interest at the moment, but I have maxed out my purchases for the year on those and they hold your money for at least 1 year and penalize you 3 months interest if you cash them in before 5 years, plus the rate changes every 6 months, and it will be less soon. I had a lot in some short-term corporate bund funds, but because interest rates are still going up, I have lost money on those: their share price has dropped about 4% and they still only yield about 2% in dividends. <\/p>\n

Dad used to talk about buying Treasuries, but I don’t know if he ever did. It always seemed complicated. But I had to open an account at Treasury Direct when I bought the Series I savings bonds<\/a> and they actually make it pretty easy to buy other kinds of government debt. At the last auction for 26-week bills, the interest was 4.55%, the same as for the 52-week bonds sold the same day. The rates are set in weekly competitive auctions where the government is financing billions of dollars of debt. But ordinary people can invest from $100 up to $10 million in a non-competitive order where you just accept whatever the competitive rate comes out to be. The bills are sold at a discount and mature at full value. So a 52-week $1,000 bond would sell for 4.55% less than that and the government would pay you $1,000 at maturity (or you can opt to roll it over into the next auction). I looked at yields of the different durations and it seems like the best rates are 26 to 52 weeks right now. Longer term rates are lower because people don’t think these high rates will last that long. And short term rates are lower because they just usually are (less risk). In fact the yield curve of those different durations is kind of messed up right now, which many people say means a recession is coming. <\/p>\n

I pulled this graph of the yield curve from www.ustreasuryyieldcurve.com<\/a>. It isn’t that the long term rates have gone down as interest rates have risen, but the shorter term rates have risen much faster than the long term rates. A year ago the 26-week rate was 0.2% and the 30-year rate was 1.9%. Now the 26-week rate is 4.6% and the 30-year rate is 3.6%.<\/p>\n

\"\"<\/a>
Yield curve today (red) vs a year ago (blue)<\/figcaption><\/figure>\n

The next deadline to enter a 26-week auction was tomorrow, December 5, so I went ahead and transferred money from my savings account to checking and told Treasury Direct to put me down for a non-competitive purchase. They said the bonds would actually be issued on December 8 and mature on June 8, so we will see how that goes. Some people ladder their bonds by buying some every month, so that you constantly have money coming in if you need it. I also plan on buying more I bonds once we get to 2023.<\/p>\n","protected":false},"excerpt":{"rendered":"

Although I have bought Savings Bonds a few times, I have never bought Treasury Bills or Treasury Bonds before. The bills are short-term notes of 1 year or less (4, 8, 13, 17, 26, and 52 weeks being the most common). Treasury Bonds are long term: 10 or 20 years. Treasury Notes are in between … Continue reading “T Bills”<\/span><\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4583","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/posts\/4583","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/comments?post=4583"}],"version-history":[{"count":10,"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/posts\/4583\/revisions"}],"predecessor-version":[{"id":4718,"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/posts\/4583\/revisions\/4718"}],"wp:attachment":[{"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/media?parent=4583"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/categories?post=4583"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/tags?post=4583"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}