Trading Treasuries (nominal and TIPS)

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exodusing
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Re: Trading Treasuries (nominal and TIPS)

Post by exodusing »

From a Vanguard order details page:
Order type Limit
Stop/Limit price Limit: $82.1836
Duration Day
All or none indicator No
Account type CASH
Transaction method TTS
Although it says Day, my two rejected orders were open for less than 5 minutes each.

I wonder if TTS is
Citi's Treasury and Trade Solutions (TTS), a division of Citigroup's Institutional Clients Group, offers integrated cash management and trade services and finance to multinational corporations, financial institutions and public sector organizations around the world.
I ended up executing at 82.36 for 75 TIPS, which is annoying compared to this rejected order, but less than $200 additional cost.
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TheTimeLord
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

TheTimeLord wrote: Thu May 18, 2023 8:19 am I was planning to sit on the sidelines until the 7/15 10 year TIPS auction but the expected yield on today's 10 year TIPS reopening of the 1/15 auction has pulled me back in.
:sharebeer
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TheTimeLord
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

TheTimeLord wrote: Thu May 18, 2023 3:39 pm
TheTimeLord wrote: Thu May 18, 2023 8:19 am I was planning to sit on the sidelines until the 7/15 10 year TIPS auction but the expected yield on today's 10 year TIPS reopening of the 1/15 auction has pulled me back in.
:sharebeer
:confused No one else participated in today's 10 year TIPS auction?

Image

https://tipswatch.com/2023/05/18/10-yea ... -12-years/
Last edited by TheTimeLord on Fri May 19, 2023 7:31 am, edited 2 times in total.
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dogagility
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Re: Trading Treasuries (nominal and TIPS)

Post by dogagility »

TheTimeLord wrote: Thu May 18, 2023 8:43 pm
TheTimeLord wrote: Thu May 18, 2023 3:39 pm
TheTimeLord wrote: Thu May 18, 2023 8:19 am I was planning to sit on the sidelines until the 7/15 10 year TIPS auction but the expected yield on today's 10 year TIPS reopening of the 1/15 auction has pulled me back in.
:sharebeer
:confused No one else participated in today's 10 year TIPS auction?
Will buy on the secondary market in a few days to add another rung to our TIPS ladder.
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TheTimeLord
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

dogagility wrote: Fri May 19, 2023 6:45 am
TheTimeLord wrote: Thu May 18, 2023 8:43 pm
TheTimeLord wrote: Thu May 18, 2023 3:39 pm
TheTimeLord wrote: Thu May 18, 2023 8:19 am I was planning to sit on the sidelines until the 7/15 10 year TIPS auction but the expected yield on today's 10 year TIPS reopening of the 1/15 auction has pulled me back in.
:sharebeer
:confused No one else participated in today's 10 year TIPS auction?
Will buy on the secondary market in a few days to add another rung to our TIPS ladder.
I am using this particular issue in several rungs of my ladder that cover the TIPS Black Hole.
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exodusing
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Re: Trading Treasuries (nominal and TIPS)

Post by exodusing »

Yesterday I tried to buy 20 year TIPS on the secondary market through Vanguard and the transaction failed multiple times apparently because the price was increasing quickly. Today I bought some more and the price dropped between Vanguard's page showing the price and a few moments later when it executed.

Yesterday Vanguard said it had 1,000 at the lowest price (they show a few levels depending on the quantity you want - the actual prices change throughout the day). I bought 75 in the morning and inventory at lowest price level moved to 925 and stayed there all day. If the website was accurate, I was the only person buying 75 or more of that issue through Vanguard (or its dealers) for the entire day.
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TheTimeLord
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

exodusing wrote: Fri May 19, 2023 7:44 am Yesterday I tried to buy 20 year TIPS on the secondary market through Vanguard and the transaction failed multiple times apparently because the price was increasing quickly. Today I bought some more and the price dropped between Vanguard's page showing the price and a few moments later when it executed.

Yesterday Vanguard said it had 1,000 at the lowest price (they show a few levels depending on the quantity you want - the actual prices change throughout the day). I bought 75 in the morning and inventory at lowest price level moved to 925 and stayed there all day. If the website was accurate, I was the only person buying 75 or more of that issue through Vanguard (or its dealers) for the entire day.
I don't know if it is relevant, but I participated in 2 Treasury auctions yesterday and I didn't receive notifications until market close which is much later than normal. Wonder if something weird was going on?
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

exodusing wrote: Thu May 18, 2023 11:54 am From a Vanguard order details page:
Order type Limit
Stop/Limit price Limit: $82.1836
Duration Day
All or none indicator No
Account type CASH
Transaction method TTS
Although it says Day, my two rejected orders were open for less than 5 minutes each.

I wonder if TTS is
Citi's Treasury and Trade Solutions (TTS), a division of Citigroup's Institutional Clients Group, offers integrated cash management and trade services and finance to multinational corporations, financial institutions and public sector organizations around the world.
I ended up executing at 82.36 for 75 TIPS, which is annoying compared to this rejected order, but less than $200 additional cost.
I think the "Day" time in force is just wrong. From my experience, all Treasury orders at Vanguard are fill or kill. Your experience clearly supports this.

As I said in an earlier post, the order type and time in force do not appear either on the order entry or preview screens at Vanguard. At least Fidelity shows you the order type (limit) and timing (fill or kill), but you cannot change them.

Kevin
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exodusing
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Re: Trading Treasuries (nominal and TIPS)

Post by exodusing »

Kevin M wrote: Fri May 19, 2023 10:10 am
exodusing wrote: Thu May 18, 2023 11:54 am From a Vanguard order details page:
Order type Limit
Stop/Limit price Limit: $82.1836
Duration Day
All or none indicator No
Account type CASH
Transaction method TTS
Although it says Day, my two rejected orders were open for less than 5 minutes each.

I wonder if TTS is
Citi's Treasury and Trade Solutions (TTS), a division of Citigroup's Institutional Clients Group, offers integrated cash management and trade services and finance to multinational corporations, financial institutions and public sector organizations around the world.
I ended up executing at 82.36 for 75 TIPS, which is annoying compared to this rejected order, but less than $200 additional cost.
I think the "Day" time in force is just wrong. From my experience, all Treasury orders at Vanguard are fill or kill. Your experience clearly supports this.

As I said in an earlier post, the order type and time in force do not appear either on the order entry or preview screens at Vanguard. At least Fidelity shows you the order type (limit) and timing (fill or kill), but you cannot change them.

Kevin
Day is clearly wrong. The "All or none indicator" is either wrong or irrelevant. As you say, the Vanguard website neither shows this information nor has any ability to change any of the order parameters (other than the security you're buying and quantity, of course).

I don't believe I've seen any evidence Vanguard is any worse at order execution, or has access to less inventory or worse pricing, than the other major brokerages, which is ultimately all I care about.

Do other brokerages specify "Transaction method" or indicate who they are executing through?

Do other brokerages have disclosure similar to:
Upon the submission of your order, VBS performs a review to determine whether the price available to you for your transaction is in line with prevailing market conditions. The review includes use of TRACE and MSRB data, quotations on comparable securities and third party pricing services
vaylie
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Re: Trading Treasuries (nominal and TIPS)

Post by vaylie »

I'm looking at next Monday's 6-month T-Bill, and Fidelity is predicting only 4.755% yield, while the previous week's 6-month T-Bill is yielding over 5%. I know Fidelity tends to underestimate yields, but is there something in the market that would cause the 6-month T-Bills to trend downward for Monday when it's only been going up recently?
exodusing
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Re: Trading Treasuries (nominal and TIPS)

Post by exodusing »

vaylie wrote: Fri May 19, 2023 1:41 pm I'm looking at next Monday's 6-month T-Bill, and Fidelity is predicting only 4.755% yield, while the previous week's 6-month T-Bill is yielding over 5%. I know Fidelity tends to underestimate yields, but is there something in the market that would cause the 6-month T-Bills to trend downward for Monday when it's only been going up recently?
Estimated yields are just guesses. I'd ignore them. It's hard enough to predict rates 15 minutes from now, let alone days ahead. The treasury market is very efficient and if there was something known, the odds are very good prices would reflect that information now. If you want to know the yield before you commit, buy last week's in the secondary market or wait until the new one trades and buy it on the secondary market.
Lyrrad
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Re: Trading Treasuries (nominal and TIPS)

Post by Lyrrad »

exodusing wrote: Fri May 19, 2023 10:31 am I don't believe I've seen any evidence Vanguard is any worse at order execution, or has access to less inventory or worse pricing, than the other major brokerages, which is ultimately all I care about.
I've compared pricing between Fidelity, Vanguard and Schwab, mainly looking at long-term TIPS.

From what I can tell, Fidelity and Vanguard have very similar inventory.

Schwab seems to have a lower spread, especially for smaller quantities.

TD Ameritrade appeared to not have many long term TIPS available, and had a higher minimum purchase amount.

I've mainly purchased through Vanguard, though I plan to make new purchases in my 401k plan at Schwab when my TD Ameritrade account transitions, hopefully in a few months.

Anyone else had similar or different experiences when comparing pricing?
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Chip Munk
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Re: Trading Treasuries (nominal and TIPS)

Post by Chip Munk »

vaylie wrote: Fri May 19, 2023 1:41 pm I'm looking at next Monday's 6-month T-Bill, and Fidelity is predicting only 4.755% yield, while the previous week's 6-month T-Bill is yielding over 5%. I know Fidelity tends to underestimate yields, but is there something in the market that would cause the 6-month T-Bills to trend downward for Monday when it's only been going up recently?
I noticed that as well. Fidelity's estimated yield for Monday's 6-month T-Bill auction is much lower than Vanguard's estimated yield which was 5.341% last time I checked. Fidelity's estimated yields are usually not too far off from what they list here: https://fixedincome.fidelity.com/ftgw/fi/FILanding where the 6-mo is currently at 5.33%. So do they know something nobody else knows or is it a mistake?
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

Lyrrad wrote: Fri May 19, 2023 9:16 pm
exodusing wrote: Fri May 19, 2023 10:31 am I don't believe I've seen any evidence Vanguard is any worse at order execution, or has access to less inventory or worse pricing, than the other major brokerages, which is ultimately all I care about.
I've compared pricing between Fidelity, Vanguard and Schwab, mainly looking at long-term TIPS.

From what I can tell, Fidelity and Vanguard have very similar inventory.

Schwab seems to have a lower spread, especially for smaller quantities.

TD Ameritrade appeared to not have many long term TIPS available, and had a higher minimum purchase amount.

I've mainly purchased through Vanguard, though I plan to make new purchases in my 401k plan at Schwab when my TD Ameritrade account transitions, hopefully in a few months.

Anyone else had similar or different experiences when comparing pricing?
When I compared Schwab and Fidelity, I saw better prices to buy on Schwab for small quantities, often their lowest price for min. 1. I think Fidelity may have had lower prices to buy large quantities (like 500?).
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

jeffyscott wrote: Sat May 20, 2023 7:16 am
Lyrrad wrote: Fri May 19, 2023 9:16 pm
exodusing wrote: Fri May 19, 2023 10:31 am I don't believe I've seen any evidence Vanguard is any worse at order execution, or has access to less inventory or worse pricing, than the other major brokerages, which is ultimately all I care about.
I've compared pricing between Fidelity, Vanguard and Schwab, mainly looking at long-term TIPS.

From what I can tell, Fidelity and Vanguard have very similar inventory.

Schwab seems to have a lower spread, especially for smaller quantities.

TD Ameritrade appeared to not have many long term TIPS available, and had a higher minimum purchase amount.

I've mainly purchased through Vanguard, though I plan to make new purchases in my 401k plan at Schwab when my TD Ameritrade account transitions, hopefully in a few months.

Anyone else had similar or different experiences when comparing pricing?
When I compared Schwab and Fidelity, I saw better prices to buy on Schwab for small quantities, often their lowest price for min. 1. I think Fidelity may have had lower prices to buy large quantities (like 500?).
This has typically been the case for Schwab, who for some reason often if not usually offers the best price for min qty 1. Most of my Schwab experience is from 2019, but when I spot checked a few more recently, they seemed to still have best pricing for min qty 1.

By "the spread" you mean the bid/ask spread, I would just compare the ask prices if buying, as that determines what you'll pay.

It's the large/small-quantity spread that is the lowest at Schwab, at either 0 or a negative value. Fidelity and Vanguard give best pricing to larger orders. Schwab has something very different going on, perhaps as a way to attract retail investors.
If I make a calculation error, #Cruncher probably will let me know.
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

vaylie wrote: Fri May 19, 2023 1:41 pm I'm looking at next Monday's 6-month T-Bill, and Fidelity is predicting only 4.755% yield, while the previous week's 6-month T-Bill is yielding over 5%. I know Fidelity tends to underestimate yields, but is there something in the market that would cause the 6-month T-Bills to trend downward for Monday when it's only been going up recently?
Primary dealers have access to the when issued market, which is between the announcement and the auction : Treasury Market When-Issued Trading Activity (there is a second when issued period from the auction until issuance). The WI market helps with "price discovery" for the auction of new issues.

I assume that Vanguard and Fidelity have access to the WI market as well, and that they are basing their expected yields on that. But apparently they are doing something different with that information, or maybe they don't have access to the WI market.

Bills with maturities of less than 26 weeks trade on the secondary market; e.g., a 13-week auction is a reopening of the 26-week, which trades on secondary. For these, everyone has access to the secondary market, and can use that to guesstimate the auction yield.

I don't know if it's relevant, but as of Thursday (I didn't load quotes on Friday), there was a sharp drop in yield between the 11/16/23 bill (5.91 month, 5.26%) and the 11/30/2023 bill (6.37 months, 4.72%):

Image

The new 26-week matures on 11/24/2023, so between the two mentioned above.

Kevin
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rbd789
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Re: Trading Treasuries (nominal and TIPS)

Post by rbd789 »

The Fidelity auto roll agreement explains how they compute their estimated yields and why they are (presumably intentionally) low.


Expected Yield
The “Expected Yield” shown on the New Issue Auction Results page on Fidelity.com is determined using the following:
• If Auction Time to Maturity (TTM) is less than or equal to 6 months, the yield will reflect the lowest secondary offering Treasury Bill yield maturing +/- 10 days from the auction maturity date
• If Auction TTM is greater than 6 month and is less than or equal to 7 years, the yield will reflect the lowest secondary offering Treasury yield maturing +/- 40 days from the auction maturity date
• If Auction TTM is greater than 7 years, the yield will reflect the lowest secondary offering Treasury yield maturing +/- 115 days from the auction maturity date

https://www.fidelity.com/bin-public/060 ... eement.pdf
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

Kevin M wrote: Sat May 20, 2023 11:33 am Primary dealers have access to the when issued market, which is between the announcement and the auction :
This statement can be misleading. I also have access to the when issued market (at least at Schwab) and I am certainly not a Primary dealer by any means. The difference is that I get the price determined at auction. I cannot specify the price I am willing to pay.
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vaylie
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Re: Trading Treasuries (nominal and TIPS)

Post by vaylie »

Kevin M wrote: Sat May 20, 2023 11:33 am I don't know if it's relevant, but as of Thursday (I didn't load quotes on Friday), there was a sharp drop in yield between the 11/16/23 bill (5.91 month, 5.26%) and the 11/30/2023 bill (6.37 months, 4.72%):
This is interesting. I wonder why there is such a sharp drop in yield? Is there anything happening in those 1-2 weeks? This does make me lean more towards buying on the secondary market though, at least for this week. I'll probably make a final decision on Monday morning.
exodusing
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Re: Trading Treasuries (nominal and TIPS)

Post by exodusing »

Doc wrote: Sat May 20, 2023 12:59 pm
Kevin M wrote: Sat May 20, 2023 11:33 am Primary dealers have access to the when issued market, which is between the announcement and the auction :
This statement can be misleading. I also have access to the when issued market (at least at Schwab) and I am certainly not a Primary dealer by any means. The difference is that I get the price determined at auction. I cannot specify the price I am willing to pay.
What do you mean by access to the when issued market? That you see when issued pricing or something more? The usual meaning is you can actually buy now at the when issued market price. Getting the price determined at auction seems indistinguishable from buying at auction.
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Doc wrote: Sat May 20, 2023 12:59 pm
Kevin M wrote: Sat May 20, 2023 11:33 am Primary dealers have access to the when issued market, which is between the announcement and the auction :
This statement can be misleading. I also have access to the when issued market (at least at Schwab) and I am certainly not a Primary dealer by any means. The difference is that I get the price determined at auction. I cannot specify the price I am willing to pay.
We've been through this before. You have access to the secondary market, not the when issued market. If you do, please tell us how you see it. I have a Schwab account so can check it out.

Also, I didn't say only primary dealers. I recall that other large institutions may have access as well, which is why I thought maybe VG and/or Fido have access, as they are not primary dealers.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

rbd789 wrote: Sat May 20, 2023 12:05 pm The Fidelity auto roll agreement explains how they compute their estimated yields and why they are (presumably intentionally) low.

Expected Yield
The “Expected Yield” shown on the New Issue Auction Results page on Fidelity.com is determined using the following:
• If Auction Time to Maturity (TTM) is less than or equal to 6 months, the yield will reflect the lowest secondary offering Treasury Bill yield maturing +/- 10 days from the auction maturity date
• If Auction TTM is greater than 6 month and is less than or equal to 7 years, the yield will reflect the lowest secondary offering Treasury yield maturing +/- 40 days from the auction maturity date
• If Auction TTM is greater than 7 years, the yield will reflect the lowest secondary offering Treasury yield maturing +/- 115 days from the auction maturity date

https://www.fidelity.com/bin-public/060 ... eement.pdf
Interesting. This indicates that they do not use the when issued market for new issues.

If by "auction time to maturity" they mean auction date to maturity date, then #2 would apply to a 26-week. The issue date to maturity for a 26-week bill is 183 days, so less than six months, and #1 would apply. Either one would explain the low yield, since the 11/30 yield was 4.72% on Thursday, and that is less than +/- 10 days from the auction maturity date of 11/24.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

Kevin M wrote: Sat May 20, 2023 3:07 pm
Doc wrote: Sat May 20, 2023 12:59 pm
Kevin M wrote: Sat May 20, 2023 11:33 am Primary dealers have access to the when issued market, which is between the announcement and the auction :
This statement can be misleading. I also have access to the when issued market (at least at Schwab) and I am certainly not a Primary dealer by any means. The difference is that I get the price determined at auction. I cannot specify the price I am willing to pay.
We've been through this before. You have access to the secondary market, not the when issued market. If you do, please tell us how you see it. I have a Schwab account so can check it out.

Also, I didn't say only primary dealers. I recall that other large institutions may have access as well, which is why I thought maybe VG and/or Fido have access, as they are not primary dealers.
https://client.schwab.com/Areas/Trade/F ... ryAuctions
(You will need to log in.)

"Find New Issues"

"Bond Type -> Treasury Auctions"

"Action Description Auction Date Maturity Minimum $(000s)
Buy US Treasury BILL 08/24/2023 05/22/2023"

I am not a primary dealer or even a large institution.
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

More on Treasury auctions

Vanguard:

https://personal.vanguard.com/us/secfun ... ryauctions
"Place auction order"
https://personal.vanguard.com/us/FixedIncomeTrading

I didn't check Fido.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Doc wrote: Sun May 21, 2023 11:03 am
Kevin M wrote: Sat May 20, 2023 3:07 pm
Doc wrote: Sat May 20, 2023 12:59 pm
Kevin M wrote: Sat May 20, 2023 11:33 am Primary dealers have access to the when issued market, which is between the announcement and the auction :
This statement can be misleading. I also have access to the when issued market (at least at Schwab) and I am certainly not a Primary dealer by any means. The difference is that I get the price determined at auction. I cannot specify the price I am willing to pay.
We've been through this before. You have access to the secondary market, not the when issued market. If you do, please tell us how you see it. I have a Schwab account so can check it out.

Also, I didn't say only primary dealers. I recall that other large institutions may have access as well, which is why I thought maybe VG and/or Fido have access, as they are not primary dealers.
https://client.schwab.com/Areas/Trade/F ... ryAuctions
(You will need to log in.)

"Find New Issues"

"Bond Type -> Treasury Auctions"

"Action Description Auction Date Maturity Minimum $(000s)
Buy US Treasury BILL 08/24/2023 05/22/2023"

I am not a primary dealer or even a large institution.
First, this doesn't provide access to trading before the auction; it simply lists the Treasuries you can buy at auction, same as at VG and Fido. You can enter an order, but it won't execute until the auction, and it won't settle until the auction settles.

Second, the example you showed is for a 13-week, which is a reissue of the 26-week, so trades on the secondary market. As I've pointed out before, this is not the same as the WI market for new issues.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Doc wrote: Sun May 21, 2023 11:07 am More on Treasury auctions

Vanguard:

https://personal.vanguard.com/us/secfun ... ryauctions
"Place auction order"
https://personal.vanguard.com/us/FixedIncomeTrading

I didn't check Fido.
Right, same thing. Just the normal listing of auctions that anyone can participate in--not the when issued market.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

Kevin M wrote: Sun May 21, 2023 11:35 am First, this doesn't provide access to trading before the auction; it simply lists the Treasuries you can buy at auction, same as at VG and Fido. You can enter an order, but it won't execute until the auction, and it won't settle until the auction settles.

Second, the example you showed is for a 13-week, which is a reissue of the 26-week, so trades on the secondary market. As I've pointed out before, this is not the same as the WI market for new issues.
We may be having a "word" issue here. I can place a MARKET order for an upcoming auction at both Schwab and Vanguard. The order will fill at the auction price that is determined by the BIG GUYS.

The reopening can also be an auction as far as I know. An auction for a 26 week bill has the same cusip as a previous 52 week bill one out of four weeks. (There may be the same type of thing with a 13 week bill but I don't buy 13 week bills so I've never looked.)
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Doc wrote: Sun May 21, 2023 12:00 pm
Kevin M wrote: Sun May 21, 2023 11:35 am First, this doesn't provide access to trading before the auction; it simply lists the Treasuries you can buy at auction, same as at VG and Fido. You can enter an order, but it won't execute until the auction, and it won't settle until the auction settles.

Second, the example you showed is for a 13-week, which is a reissue of the 26-week, so trades on the secondary market. As I've pointed out before, this is not the same as the WI market for new issues.
We may be having a "word" issue here. I can place a MARKET order for an upcoming auction at both Schwab and Vanguard. The order will fill at the auction price that is determined by the BIG GUYS.

The reopening can also be an auction as far as I know. An auction for a 26 week bill has the same cusip as a previous 52 week bill one out of four weeks. (There may be the same type of thing with a 13 week bill but I don't buy 13 week bills so I've never looked.)
There is a misunderstanding problem. You replied to my comment about the when-issued (WI) market, but you are not sharing anything related to that market. You are simply talking about the auctions that are open to everyone. Previously you mentioned the secondary market, which also is open to everyone.

Yes, some existing issues are reopened for auctions. For these, you can buy them on the secondary market on any trading day, or wait for the auction.

Thanks for explaining how the reopening for 52-week bills works--I've never quite understood that. When I check now, I see that the 26-week auctions on 4/3/2023 and 5/1/2023 were reopenings of a 26-week, but the 26-week auctions in between these dates and since the latter date were new issues. I probably will forget this, but it's easy enough to check again to remind myself.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

^ I did not know what that market is, but found this description:

When-issued (WI) trading refers to trading of the new security after the announcement but before issuance.
https://libertystreeteconomics.newyorkf ... -activity/
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

Kevin M wrote: Sun May 21, 2023 12:52 pm
Doc wrote: Sun May 21, 2023 12:00 pm
Kevin M wrote: Sun May 21, 2023 11:35 am First, this doesn't provide access to trading before the auction; it simply lists the Treasuries you can buy at auction, same as at VG and Fido. You can enter an order, but it won't execute until the auction, and it won't settle until the auction settles.

Second, the example you showed is for a 13-week, which is a reissue of the 26-week, so trades on the secondary market. As I've pointed out before, this is not the same as the WI market for new issues.
We may be having a "word" issue here. I can place a MARKET order for an upcoming auction at both Schwab and Vanguard. The order will fill at the auction price that is determined by the BIG GUYS.

The reopening can also be an auction as far as I know. An auction for a 26 week bill has the same cusip as a previous 52 week bill one out of four weeks. (There may be the same type of thing with a 13 week bill but I don't buy 13 week bills so I've never looked.)
There is a misunderstanding problem. You replied to my comment about the when-issued (WI) market, but you are not sharing anything related to that market. You are simply talking about the auctions that are open to everyone. Previously you mentioned the secondary market, which also is open to everyone.

Yes, some existing issues are reopened for auctions. For these, you can buy them on the secondary market on any trading day, or wait for the auction.

Thanks for explaining how the reopening for 52-week bills works--I've never quite understood that. When I check now, I see that the 26-week auctions on 4/3/2023 and 5/1/2023 were reopenings of a 26-week, but the 26-week auctions in between these dates and since the latter date were new issues. I probably will forget this, but it's easy enough to check again to remind myself.
"Wait for the auction" is the issue that I was trying to address. Individuals like us can buy at the auction. We just cannot specify the price we are willing to pay. Our orders fill at the auction price which is established by those entities that can specify the price they are willing to pay. That price is the auction price not the market price at the time of the auction.

This pricing mechanism for us little guys applies both to new issues and also reopening issues like every fourth 26 week bill auction.
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Re: Trading Treasuries (nominal and TIPS)

Post by vaylie »

Results for the 26-week T-Bill are out today. Price is ~97.372 today. If my understanding is correct, then the yield should be around 5.26%. This is much higher than the Fidelity estimated yield of 4.786% this morning, so I guess their estimates are generally not too reliable.

In comparison, when I checked Schwab today for the new 26-week issue, they had an "Evaluated Price" of 97.32 or 97.38 thereabouts (can't quite remember what it was). I can't find any explanations for how they arrived at that number, but it seems Schwab has slightly better models for evaluating the price.
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Re: Trading Treasuries (nominal and TIPS)

Post by rbd789 »

vaylie wrote: Mon May 22, 2023 10:43 am Results for the 26-week T-Bill are out today. Price is ~97.372 today. If my understanding is correct, then the yield should be around 5.26%. This is much higher than the Fidelity estimated yield of 4.786% this morning, so I guess their estimates are generally not too reliable.

In comparison, when I checked Schwab today for the new 26-week issue, they had an "Evaluated Price" of 97.32 or 97.38 thereabouts (can't quite remember what it was). I can't find any explanations for how they arrived at that number, but it seems Schwab has slightly better models for evaluating the price.
I posted info, above just a day or two ago, about how Fidelity calculates their estimates. They are reliable if you understand what they are looking at.
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Re: Trading Treasuries (nominal and TIPS)

Post by rbd789 »

rbd789 wrote: Sat May 20, 2023 12:05 pm The Fidelity auto roll agreement explains how they compute their estimated yields and why they are (presumably intentionally) low.


Expected Yield
The “Expected Yield” shown on the New Issue Auction Results page on Fidelity.com is determined using the following:
• If Auction Time to Maturity (TTM) is less than or equal to 6 months, the yield will reflect the lowest secondary offering Treasury Bill yield maturing +/- 10 days from the auction maturity date
• If Auction TTM is greater than 6 month and is less than or equal to 7 years, the yield will reflect the lowest secondary offering Treasury yield maturing +/- 40 days from the auction maturity date
• If Auction TTM is greater than 7 years, the yield will reflect the lowest secondary offering Treasury yield maturing +/- 115 days from the auction maturity date

https://www.fidelity.com/bin-public/060 ... eement.pdf
It would be nice if this info was presented plainly on Fidelity's web pages rather than buried in the auto roll agreement, but it is available nonetheless.
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Re: Trading Treasuries (nominal and TIPS)

Post by #Cruncher »

vaylie wrote: Mon May 22, 2023 10:43 amResults for the 26-week T-Bill are out today. Price is ~97.372 today. If my understanding is correct, then the yield should be around 5.26%.
As shown on the auction results PDF [1] the investment rate is 5.398%, not 5.26%.
5.398% = (100 / 97.371917 - 1) * (366 / 183) [2]
  1. You can find links to auction results on this TreasuryDirect page.
  2. Note this bill matures in 183 days instead of the usual 182 to avoid maturing on Thanksgiving Day.
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Re: Trading Treasuries (nominal and TIPS)

Post by molecular »

Trying to start a TIPS ladder.
I missed the 10 year TIPS re-opening last week.
Is buying the issue on the secondary market satisfactory compared to the last auction result?
Secondary says price 96.761, coupon 1.25, yield to maturity bid ask 1.487.
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

molecular wrote: Mon May 22, 2023 11:21 am Trying to start a TIPS ladder.
I missed the 10 year TIPS re-opening last week.
Is buying the issue on the secondary market satisfactory compared to the last auction result?
Secondary says price 96.761, coupon 1.25, yield to maturity bid ask 1.487.
That is a better price than the auction result. FWIW, the coupon is 1.125 not 1.25 if we are talking about the same issue.

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Re: Trading Treasuries (nominal and TIPS)

Post by Chip Munk »

rbd789 wrote: Mon May 22, 2023 10:48 am
rbd789 wrote: Sat May 20, 2023 12:05 pm The Fidelity auto roll agreement explains how they compute their estimated yields and why they are (presumably intentionally) low.


Expected Yield
The “Expected Yield” shown on the New Issue Auction Results page on Fidelity.com is determined using the following:
• If Auction Time to Maturity (TTM) is less than or equal to 6 months, the yield will reflect the lowest secondary offering Treasury Bill yield maturing +/- 10 days from the auction maturity date
• If Auction TTM is greater than 6 month and is less than or equal to 7 years, the yield will reflect the lowest secondary offering Treasury yield maturing +/- 40 days from the auction maturity date
• If Auction TTM is greater than 7 years, the yield will reflect the lowest secondary offering Treasury yield maturing +/- 115 days from the auction maturity date

https://www.fidelity.com/bin-public/060 ... eement.pdf
It would be nice if this info was presented plainly on Fidelity's web pages rather than buried in the auto roll agreement, but it is available nonetheless.
Thank you for posting this information (and thanks to Kevin M for the chart and explanation posted above) to explain Fidelity's estimated yield for today's 6-month T-Bill auction. Given the estimate posted on Vanguard's auction page was 5.341%, they appear to use a different method for calculating their estimate so it pays to check more than one source. I also check the secondary market rates the day before the auction as another sanity check on Fidelity's estimate. As has already been posted, the auction results were good -- 5.398% -- so I'm relieved.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

jeffyscott wrote: Sun May 21, 2023 5:33 pm ^ I did not know what that market is, but found this description:

When-issued (WI) trading refers to trading of the new security after the announcement but before issuance.
https://libertystreeteconomics.newyorkf ... -activity/
I provided the same link when I mentioned it above. Good explanation I thought.
Kevin M wrote: Sat May 20, 2023 11:33 am Primary dealers have access to the when issued market, which is between the announcement and the auction : Treasury Market When-Issued Trading Activity (there is a second when issued period from the auction until issuance). The WI market helps with "price discovery" for the auction of new issues.
Keep up, jeffyscott! :annoyed :wink:
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by Lyrrad »

Kevin M wrote: Sun May 21, 2023 11:35 am
First, this doesn't provide access to trading before the auction; it simply lists the Treasuries you can buy at auction, same as at VG and Fido. You can enter an order, but it won't execute until the auction, and it won't settle until the auction settles.

Second, the example you showed is for a 13-week, which is a reissue of the 26-week, so trades on the secondary market. As I've pointed out before, this is not the same as the WI market for new issues.
I notice 912797FL6 maturing on November 24, 2023, is available for purchase at Schwab on the secondary market, even though it won’t be first issued until Thursday. If I buy today, will it settle tomorrow or Thursday?
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Re: Trading Treasuries (nominal and TIPS)

Post by molecular »

TheTimeLord wrote: Mon May 22, 2023 11:33 am FWIW, the coupon is 1.125 not 1.25 if we are talking about the same issue.
My error; thanks for the correction.
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

Kevin M wrote: Mon May 22, 2023 12:25 pm
jeffyscott wrote: Sun May 21, 2023 5:33 pm ^ I did not know what that market is, but found this description:

When-issued (WI) trading refers to trading of the new security after the announcement but before issuance.
https://libertystreeteconomics.newyorkf ... -activity/
I provided the same link when I mentioned it above. Good explanation I thought.
Kevin M wrote: Sat May 20, 2023 11:33 am Primary dealers have access to the when issued market, which is between the announcement and the auction : Treasury Market When-Issued Trading Activity (there is a second when issued period from the auction until issuance). The WI market helps with "price discovery" for the auction of new issues.
Keep up, jeffyscott! :annoyed :wink:
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Re: Trading Treasuries (nominal and TIPS)

Post by Hector »

Lyrrad wrote: Mon May 22, 2023 12:28 pm
Kevin M wrote: Sun May 21, 2023 11:35 am
First, this doesn't provide access to trading before the auction; it simply lists the Treasuries you can buy at auction, same as at VG and Fido. You can enter an order, but it won't execute until the auction, and it won't settle until the auction settles.

Second, the example you showed is for a 13-week, which is a reissue of the 26-week, so trades on the secondary market. As I've pointed out before, this is not the same as the WI market for new issues.
I notice 912797FL6 maturing on November 24, 2023, is available for purchase at Schwab on the secondary market, even though it won’t be first issued until Thursday. If I buy today, will it settle tomorrow or Thursday?
It should settle on 25th.
You can look at the security detail for that CUSIP and you will see following on Schwab:
Price Details: Price based on 25 bonds and a settlement date of 05/25/2023
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

vaylie wrote: Mon May 22, 2023 10:43 am Results for the 26-week T-Bill are out today. Price is ~97.372 today. If my understanding is correct, then the yield should be around 5.26%.
How did you come up with that? I was going to point out the the YIELD function does not work for bills with maturities of less than 52 weeks when they use 366 days for days in the year, but the YIELD calc gives 5.383%, compared to the Treasury calculated yield of 5.398% (as shown by #Cruncher).
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by zeep »

The Fidelity secondary inventory significantly shows higher yields for US Treasuries than US Treasury Zeros. Currently, it shows 5.35% for the 3 month bill, and 4.73% for the 3 month zeros.

I assume the difference is just supply and demand.
Which provides a better indicator for upcoming a T-bill auctions? Intuitively, I'd think the 3 month that spread seems wild. I like to use Auto Roll, but that spread is big enough to buy in the secondary if the 4.73 is a better predictor of auction results.
Or is there tax difference that accounts for the spread, even if held to maturity ?
Thanks
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

zeep wrote: Tue May 23, 2023 10:33 am The Fidelity secondary inventory significantly shows higher yields for US Treasuries than US Treasury Zeros. Currently, it shows 5.35% for the 3 month bill, and 4.73% for the 3 month zeros.

I assume the difference is just supply and demand.
Which provides a better indicator for upcoming a T-bill auctions? Intuitively, I'd think the 3 month that spread seems wild. I like to use Auto Roll, but that spread is big enough to buy in the secondary if the 4.73 is a better predictor of auction results.
Or is there tax difference that accounts for the spread, even if held to maturity ?
Thanks
I would use bill yields as an indicator to estimate bill auction yields. STRIPS are a completely different animal.

Here is a chart of Treasury (all types) yields out to 1 year, with STRIPS shown in red:

Image

The reason for the red vertical lines is that stripped principal and stripped interest issues maturing on the same date have different yields.

Here is a chart showing all maturities:

Image

We see that although STRIPS have lower yields than other Ts at shorter maturities, they can have higher yields at longer maturities, depending on which type (again, we see the red vertical bars because of the two kinds of STRIPS).

Kevin
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Yield jump from 5/31 to 6/1

Post by Kevin M »

Image
Yowza! The ask yield for the 5/30 bill is 2.62%, while the yield for the 6/1 bill is 6.89%.

The lowest 5/31 yield is 2.06% for the 2.75% coupon note.

The high yield is 7.07% for the 6/6 and 6/8 bills.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

So, I have $35K in MM in Roth that I was holding to buy the next big dip (10% or more). I put the rest into short term bills. I'm getting impatient, so I think I'll put the cash into bills.

Considering 4w or 8w auction vs. secondary purchase today. The 4w, 912797FQ5, ask yield is 5.58 (bid is 5.78, so quite a large b/a spread of 20 bps). A buy today settles tomorrow, so start earning the higher yield now (FZDXX 1d yield is 4.91%). An auction buy tomorrow settles next Tuesday, so 5 days in FZDXX until it settles.

The 8w, 912797FZ5, ask yield is 5.06 with bid at 5.20, so 14 bps b/a spread. Same deal with settlement dates.

I'm leaning toward buying the 4w today on secondary--a bird in the hand, and all of that. In theory, if the auction were today, one might expect a yield that is the midpoint of the bid/ask, so say 5.68, but we've seen that auctions have their own dynamics, and based on recent auctions, it could be higher. Of course we don't know what will happen to yields between today and tomorrow.

Yes, the dollar amount is small regardless of what I do, but the fun for us optimizers is in attempting to optimize.

What would you do? Please, no snarky replies about putting it into a fund--just interested in thoughts from those who are considering something similar.

Thanks,

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by Zizou »

What if the Treasury misses the payment at maturity? Would the money just sit there not earning anything until the debt ceiling issue gets resolved?
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Re: Trading Treasuries (nominal and TIPS)

Post by exodusing »

Zizou wrote: Wed May 24, 2023 1:44 pm What if the Treasury misses the payment at maturity? Would the money just sit there not earning anything until the debt ceiling issue gets resolved?
or until funds are otherwise available that can be used for the payment.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Zizou wrote: Wed May 24, 2023 1:44 pm What if the Treasury misses the payment at maturity? Would the money just sit there not earning anything until the debt ceiling issue gets resolved?
I am not worried about that, and continue to buy Treasuries without even considering it.

Also, the 4w maturity is 6/27, which is well past the 6/1 date that the Treasury market seems to be freaked about. Check out the debt ceiling megathread if you want to discuss this aspect more.

No one has weighed in, so I'm buying the 4w on the secondary now. I don't like to wait a day to buy, and then 5 more days to settle.
If I make a calculation error, #Cruncher probably will let me know.
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