Trading Treasuries (nominal and TIPS)

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protagonist
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Re: Trading Treasuries (nominal and TIPS)

Post by protagonist »

phoroner wrote: Mon Feb 20, 2023 10:45 am When so close to maturity, TIPS can have some odd behavior. Real yields are converging with nominal securities, and the market is pricing expected CPI change over the short term.

Restated with example: A Tbill maturing 4/13 has YTM of 4.651%, so the TIPS maturing 4/15 would be expected to have a similar nominal yield. But seasonal adjustment of expected inflation is impacting the TIPS pricing. Which may or may not favor one or the other.

If you search for seasonal adjustment TIPS, there are threads dedicated to this.
I understand the concept of seasonal adjustment. Can that explain the whopping difference between the current -2.09% yield on the 4/23 TIPS , and the +0.52% yield on the 1/23 TIPS last mid-November (approximately the same time interval to maturity)?
Last edited by protagonist on Mon Feb 20, 2023 11:18 am, edited 2 times in total.
phoroner
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Re: Trading Treasuries (nominal and TIPS)

Post by phoroner »

I think so
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Here is the short-term TIPS yield curve from Friday:

Image

(SA = seasonally adjusted)

As mentioned, TIPS that are very close to maturity trade more like a nominal Treasury of same maturity. We know the inflation adjustments through 4/1/2023, so there are only 15 days for which the adjustments are unknown for the 4/15/2023 TIPS. I have a spreadsheet in which I was comparing the 1/15/2023 TIPS to the 1/15/2023 nominal once we knew all the inflation adjustments; maybe I'll fire that up again for the 4/15/2023 TIPS soon.

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ChiKid24
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Re: Trading Treasuries (nominal and TIPS)

Post by ChiKid24 »

Today's 6-month just priced above 5%. Giddyup!
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

ChiKid24 wrote: Tue Feb 21, 2023 12:17 pm Today's 6-month just priced above 5%. Giddyup!
You are referring to today's 26-week auction yield of 5.110%, maturing 08/24/2023. The 6-month had already breached 5% on the secondary market on Friday, which I posted about on Saturday.

The yield of a bill maturing 8/17/2023 was 5.01% on secondary a bit earlier today when I pulled quotes from Fidelity.
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ChiKid24
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Re: Trading Treasuries (nominal and TIPS)

Post by ChiKid24 »

Kevin M wrote: Tue Feb 21, 2023 12:30 pm
ChiKid24 wrote: Tue Feb 21, 2023 12:17 pm Today's 6-month just priced above 5%. Giddyup!
You are referring to today's 26-week auction yield of 5.110%, maturing 08/24/2023. The 6-month had already breached 5% on the secondary market on Friday, which I posted about on Saturday.

The yield of a bill maturing 8/17/2023 was 5.01% on secondary a bit earlier today when I pulled quotes from Fidelity.
Correct. First 26-week auction with a five handle in quite some time. Waiting to see where the 52-week will price. Have an order on that one too as I continue building my ladder.
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Re: Trading Treasuries (nominal and TIPS)

Post by ChiKid24 »

52-week bill order just priced at 95.1517 for a yield over 5%
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

ChiKid24 wrote: Tue Feb 21, 2023 12:41 pm
Kevin M wrote: Tue Feb 21, 2023 12:30 pm
ChiKid24 wrote: Tue Feb 21, 2023 12:17 pm Today's 6-month just priced above 5%. Giddyup!
You are referring to today's 26-week auction yield of 5.110%, maturing 08/24/2023. The 6-month had already breached 5% on the secondary market on Friday, which I posted about on Saturday.

The yield of a bill maturing 8/17/2023 was 5.01% on secondary a bit earlier today when I pulled quotes from Fidelity.
Correct. First 26-week auction with a five handle in quite some time. Waiting to see where the 52-week will price. Have an order on that one too as I continue building my ladder.
Nope. The 26-week auctioned on 02/13/2023 had a yield of 5.030%.

The 52-week auction results were already available when I checked the 26-week:

Image

(I have a script that pulls auction results from TreasuryDirect.)

Kevin
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coachd50
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Re: Trading Treasuries (nominal and TIPS)

Post by coachd50 »

Another very informative thread. Thank you
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Re: Trading Treasuries (nominal and TIPS)

Post by investingisart »

Sorry if it is a silly question.

A lot of discussion around 3 months to 1 year T-Bills. Yes, the yields are spicy for sure. But at what point do you guys plan to lock-in into a 10Y, 20Y or even a 30Y treasury? They might look juicy after 3-4 years when Fed cuts the rates back to 1-2%. And those 10Y/20Y we lock-in might also shoot up and give much more than the 5% APY yield during those couple of years (similar to how bonds lost 20-25% last year?)

So how and when are you planning to capitalize that opportunity?

Thanks!
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

investingisart wrote: Wed Feb 22, 2023 12:23 pm Sorry if it is a silly question.

A lot of discussion around 3 months to 1 year T-Bills. Yes, the yields are spicy for sure. But at what point do you guys plan to lock-in into a 10Y, 20Y or even a 30Y treasury? They might look juicy after 3-4 years when Fed cuts the rates back to 1-2%. And those 10Y/20Y we lock-in might also shoot up and give much more than the 5% APY yield during those couple of years (similar to how bonds lost 20-25% last year?)

So how and when are you planning to capitalize that opportunity?

Thanks!
It is not a silly question. What you are pointing out is the reinvestment risk of staying short term; i.e., you might do better buying a 10-year now than rolling a 1-year for 10 years, which could happen if short-term yields decline enough.

The least risky solution is to match your duration to your investing horizon, but also to consider inflation (e.g., TIPS might be a better long-term fixed income holding due to potential unexpected inflation.

Those of us who are staying shorter term are incurring more reinvestment risk, but less price risk.

The yield curves do indicate that the market expects shorter term yields to decline, which is why the nominal and real yield curves are inverted between shorter term and intermediate term securities.

I think the majority of Bogleheads just hold intermediate or long term bond funds. There is no one thing that we are doing--everyone has different goals, risk tolerances, etc.

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Re: Trading Treasuries (nominal and TIPS)

Post by hudson »

investingisart wrote: Wed Feb 22, 2023 12:23 pm Sorry if it is a silly question.

But at what point do you guys plan to lock-in into a 10Y, 20Y or even a 30Y treasury?
So how and when are you planning to capitalize that opportunity?

Thanks!
It's a very serious question for a retired 75 year old.
When? As soon as my CDs mature in 2024. I only go short for my "problem solving fund."
How? I'm seriously thinking of this:
25% 5 yr...half TIPS half nominal
25% 10 yr...half TIPS half nominal
25% 15 yr...half TIPS half nominal
25% 20 yr...half TIPS half nominal
rockstar
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Re: Trading Treasuries (nominal and TIPS)

Post by rockstar »

investingisart wrote: Wed Feb 22, 2023 12:23 pm Sorry if it is a silly question.

A lot of discussion around 3 months to 1 year T-Bills. Yes, the yields are spicy for sure. But at what point do you guys plan to lock-in into a 10Y, 20Y or even a 30Y treasury? They might look juicy after 3-4 years when Fed cuts the rates back to 1-2%. And those 10Y/20Y we lock-in might also shoot up and give much more than the 5% APY yield during those couple of years (similar to how bonds lost 20-25% last year?)

So how and when are you planning to capitalize that opportunity?

Thanks!
For me bonds only make sense when they provide a return close to what I expect for equities. Otherwise I’d have my money in equities. If I can get 6-7% long term bonds, then holding longer bonds make more sense to me. But what I really want is a return in excess of inflation. And I can get that with TIPS. Staying short for now seems safe with the intention of deploying into equities. That’s my mental acrobatics. I like Buffett’s 90/10 before retirement with a transition to liability matching.
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TheTimeLord
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

investingisart wrote: Wed Feb 22, 2023 12:23 pm Sorry if it is a silly question.

A lot of discussion around 3 months to 1 year T-Bills. Yes, the yields are spicy for sure. But at what point do you guys plan to lock-in into a 10Y, 20Y or even a 30Y treasury? They might look juicy after 3-4 years when Fed cuts the rates back to 1-2%. And those 10Y/20Y we lock-in might also shoot up and give much more than the 5% APY yield during those couple of years (similar to how bonds lost 20-25% last year?)

So how and when are you planning to capitalize that opportunity?

Thanks!
I have been locking things in via 10 yr. TIPS as opposed to nominals with the yield around 1.5%. But I can understand understand the attraction of longer dated nominals.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
Newlife
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Re: Trading Treasuries (nominal and TIPS)

Post by Newlife »

Where can I find out the yield of the TIPS I purchased in the secondary market in Fidelity?
Here is the order.
YOU BOUGHT UNITED STATES TREASURY 0.62500% 01/15/2024 (Cash)Close Popup
Symbol 912828B25
Description UNITED STATES TREASURY 0.62500% 01/15/2024
Shares + 10,000.000
Price 98.179
Amount -$12,530.77
Interest $3.52
Settlement Date 01/31/2023

Thank you very much.
MisterMister
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Re: Trading Treasuries (nominal and TIPS)

Post by MisterMister »

Newlife wrote: Sun Feb 26, 2023 11:30 pm Where can I find out the yield of the TIPS I purchased in the secondary market in Fidelity?
Here is the order.
YOU BOUGHT UNITED STATES TREASURY 0.62500% 01/15/2024 (Cash)Close Popup
Symbol 912828B25
Description UNITED STATES TREASURY 0.62500% 01/15/2024
Shares + 10,000.000
Price 98.179
Amount -$12,530.77
Interest $3.52
Settlement Date 01/31/2023

Thank you very much.
This should be reported to you in your trade confirmation. Anyway it looks to be about 2.566%. If you use Excel this formula shows the answer:

=YIELD(DATEVALUE("1/31/2023"),DATEVALUE("1/15/2024"),0.625%,98.179,100,2,1)
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Re: Trading Treasuries (nominal and TIPS)

Post by chrisdds98 »

investingisart wrote: Wed Feb 22, 2023 12:23 pm Sorry if it is a silly question.

A lot of discussion around 3 months to 1 year T-Bills. Yes, the yields are spicy for sure. But at what point do you guys plan to lock-in into a 10Y, 20Y or even a 30Y treasury? They might look juicy after 3-4 years when Fed cuts the rates back to 1-2%. And those 10Y/20Y we lock-in might also shoot up and give much more than the 5% APY yield during those couple of years (similar to how bonds lost 20-25% last year?)

So how and when are you planning to capitalize that opportunity?

Thanks!
this sounds like a good time to consider doing a bond barbell. keep half in XHLF and the rest in EDV/LTPZ and continue balancing if interest rates on the long end continue to increase
Newlife
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Re: Trading Treasuries (nominal and TIPS)

Post by Newlife »

MisterMister wrote: Mon Feb 27, 2023 8:20 am
Newlife wrote: Sun Feb 26, 2023 11:30 pm Where can I find out the yield of the TIPS I purchased in the secondary market in Fidelity?
Here is the order.
YOU BOUGHT UNITED STATES TREASURY 0.62500% 01/15/2024 (Cash)Close Popup
Symbol 912828B25
Description UNITED STATES TREASURY 0.62500% 01/15/2024
Shares + 10,000.000
Price 98.179
Amount -$12,530.77
Interest $3.52
Settlement Date 01/31/2023

Thank you very much.
This should be reported to you in your trade confirmation. Anyway it looks to be about 2.566%. If you use Excel this formula shows the answer:

=YIELD(DATEVALUE("1/31/2023"),DATEVALUE("1/15/2024"),0.625%,98.179,100,2,1)
Thank you for the answer. MisterMister. Now, I know where to look for the information. Learning how to use Excel is on my list.
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Hector
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Re: Trading Treasuries (nominal and TIPS)

Post by Hector »

What tools do you use to calculate individual treasurys return?

Do you have importhtml or importxml query that you use to get wsj quotes?
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Hector wrote: Wed Mar 01, 2023 7:45 pm What tools do you use to calculate individual treasurys return?

Do you have importhtml or importxml query that you use to get wsj quotes?
Some people use WSJ quotes. I download quotes from Fidelity, and import them into a spreadsheet. You can do the same at Vanguard or Schwab.

Kevin
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Weathering
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Re: Trading Treasuries (nominal and TIPS)

Post by Weathering »

investingisart wrote: Wed Feb 22, 2023 12:23 pm Sorry if it is a silly question.

A lot of discussion around 3 months to 1 year T-Bills. Yes, the yields are spicy for sure. But at what point do you guys plan to lock-in into a 10Y, 20Y or even a 30Y treasury? They might look juicy after 3-4 years when Fed cuts the rates back to 1-2%. And those 10Y/20Y we lock-in might also shoot up and give much more than the 5% APY yield during those couple of years (similar to how bonds lost 20-25% last year?)

So how and when are you planning to capitalize that opportunity?

Thanks!
There isn’t a 5% APY 10Y/20Y Treasury available currently. 10Y is 4%. If 5% 10Y or 20Y becomes available it will be very tempting.
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Re: Trading Treasuries (nominal and TIPS)

Post by nonnie »

I am purchasing ST Treasuries in taxable account. June 27 and August 17. I've read the thread and a few other places and the only answer I have found as to why Zeros have a slightly higher yield is volatility. Is that correct?

This is my first year purchasing Treasuries, mostly taxable, and I've started reading about how to handle taxes, accrued interest and having to deduct it over two years, etc. and it seems the best way to solve that plus get a slightly higher return is with a Zero.

Comments and info, please.
er999
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Re: Trading Treasuries (nominal and TIPS)

Post by er999 »

investingisart wrote: Wed Feb 22, 2023 12:23 pm Sorry if it is a silly question.

A lot of discussion around 3 months to 1 year T-Bills. Yes, the yields are spicy for sure. But at what point do you guys plan to lock-in into a 10Y, 20Y or even a 30Y treasury? They might look juicy after 3-4 years when Fed cuts the rates back to 1-2%. And those 10Y/20Y we lock-in might also shoot up and give much more than the 5% APY yield during those couple of years (similar to how bonds lost 20-25% last year?)

So how and when are you planning to capitalize that opportunity?

Thanks!
Not guaranteed the rates will be cut back to 1-2% in 3-4 years. It possible this could be the new normal - I remember around 2000 when bank accounts were paying 3-4% interest. The last decade or so was the so called era of financial repression when rates were taken to new zero. Will things return to that in 3-4 years or not?

For me personally I bought a little of 30 years tips at auction Feb 2023. Not buying more nominal treasuries but also not selling my vanguard long term treasury fund either (VGLT). If you want to lock in the higher rates you could buy VGLT or an individual treasury. Personally I feel the tips argument more convincing now (of course 2 years ago I was convinced by the first 20% long term treasurys thread and bought VGLT then losing about 30% with the crash last year).
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

nonnie wrote: Thu Mar 02, 2023 12:57 pm I am purchasing ST Treasuries in taxable account. June 27 and August 17. I've read the thread and a few other places and the only answer I have found as to why Zeros have a slightly higher yield is volatility. Is that correct?

This is my first year purchasing Treasuries, mostly taxable, and I've started reading about how to handle taxes, accrued interest and having to deduct it over two years, etc. and it seems the best way to solve that plus get a slightly higher return is with a Zero.

Comments and info, please.
I believe by "zeros" you mean Treasury bills, which have a 0% coupon. There is another type of zero: STRIPS, which can have terms much longer than one year (max t bill term is 52 weeks).

Tbills don't always have a higher yield than notes or bonds of similar maturity, but often they do. STRIPS can have a higher or lower yield than a coupon bond of similar maturity, depending on the type (stripped interest or stripped principal) and the maturity.

As discussed in the OP, for t bills held to maturity, interest is reported in box 3 of 1099-INT. Tax reporting can be slightly more complicated for notes and bonds, but I don't find it onerous at all. I pick whatever has the highest yield with about the term I'm looking for.

Kevin
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nonnie
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Re: Trading Treasuries (nominal and TIPS)

Post by nonnie »

Kevin M wrote: Thu Mar 02, 2023 1:16 pm
nonnie wrote: Thu Mar 02, 2023 12:57 pm I am purchasing ST Treasuries in taxable account. June 27 and August 17. I've read the thread and a few other places and the only answer I have found as to why Zeros have a slightly higher yield is volatility. Is that correct?

This is my first year purchasing Treasuries, mostly taxable, and I've started reading about how to handle taxes, accrued interest and having to deduct it over two years, etc. and it seems the best way to solve that plus get a slightly higher return is with a Zero.

Comments and info, please.
I believe by "zeros" you mean Treasury bills, which have a 0% coupon. There is another type of zero: STRIPS, which can have terms much longer than one year (max t bill term is 52 weeks).

Tbills don't always have a higher yield than notes or bonds of similar maturity, but often they do. STRIPS can have a higher or lower yield than a coupon bond of similar maturity, depending on the type (stripped interest or stripped principal) and the maturity.

As discussed in the OP, for t bills held to maturity, interest is reported in box 3 of 1099-INT. Tax reporting can be slightly more complicated for notes and bonds, but I don't find it onerous at all. I pick whatever has the highest yield with about the term I'm looking for.

Kevin
Thanks, I was careful not to mention STRIPS as I saw that conversation but still not precise enough, thanks for clarifying the language to use. I did mean Treasury bills with a 0% coupon. When I did another purchase at the beginning of the month, 0% coupons had the he highest YTMso I was just curious.

Here's my understanding of reporting interest income--which could be wrong as I've not started reading IRS or started w/Turbo Tax. Last year I purchased a several Treasuries with maturity dates in 2022, 2023 and 2024. I paid accrued interest. Fidelity reports--to me, not IRS--the amount of accrued interest I paid when I purchased these. My understanding is that of the accrued interest amount reported to me, I can only deduct--from my 1099 reported interest income--the portion of the accrued interest applicable to 2022. Does that make sense that way I've worded it?

Thanks much,
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

^Yes, that is the most common interpretation of IRS regulations. However, the way Vanguard presents it on the 1099, for example, kind of leads one to just subtract it all for 2022.

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Re: Trading Treasuries (nominal and TIPS)

Post by kalarama »

I bought some of the 2053 TIPS at auction in mid Feb and am looking to add some more. Now that they have settled on 2/28/23, I do see them on Fidelity secondary market. However, for the past 2 days, I've seen very limited bids/asks with only quantity of 50 or 75. Does it generally take time for the depth of book to fill in like the rest of the TIPS?
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Re: Trading Treasuries (nominal and TIPS)

Post by HM 7 »

I want to buy a one year Treasury +/- a few months.

If I buy a one year T-bill at auction, the gain will be a short term capital gain (or ordinary dividend) both with the same tax rate. correct?
If I buy a treasury maturing in 13-14 month on the secondary market, the capital gain will be long term cap gain with more favorable tax treatment. correct?
You will get taxed on the coupon of the 13-14 month treasury, but there are treasuries maturing 5/15/24 with only 0.25% coupons.

Doesn't it make sense to get the slightly longer duration on the secondary market so that you are taxed at 15-20% rather than your marginal tax rate?
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

HM 7 wrote: Thu Mar 02, 2023 7:45 pm I want to buy a one year Treasury +/- a few months.

If I buy a one year T-bill at auction, the gain will be a short term capital gain (or ordinary dividend) both with the same tax rate. correct?
If I buy a treasury maturing in 13-14 month on the secondary market, the capital gain will be long term cap gain with more favorable tax treatment. correct?
You will get taxed on the coupon of the 13-14 month treasury, but there are treasuries maturing 5/15/24 with only 0.25% coupons.

Doesn't it make sense to get the slightly longer duration on the secondary market so that you are taxed at 15-20% rather than your marginal tax rate?
No, most of this is wrong, but this is the wrong thread for tax questions. Please post your question in Taxation of Treasury bills, notes and bonds - Bogleheads.org. Please first look at the first post, which may answer your questions. If not, feel free to ask for more details in that thread.

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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

kalarama wrote: Thu Mar 02, 2023 6:43 pm I bought some of the 2053 TIPS at auction in mid Feb and am looking to add some more. Now that they have settled on 2/28/23, I do see them on Fidelity secondary market. However, for the past 2 days, I've seen very limited bids/asks with only quantity of 50 or 75. Does it generally take time for the depth of book to fill in like the rest of the TIPS?
That's a great question. Market is closed, but what I see now is no depth of book at all. Just min qty 50.

Let's take a look tomorrow.
If I make a calculation error, #Cruncher probably will let me know.
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TheTimeLord
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

Anyone else looking at participating in next week's 3 yr. auction?
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kalarama
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Re: Trading Treasuries (nominal and TIPS)

Post by kalarama »

Kevin M wrote: Fri Mar 03, 2023 12:38 am
kalarama wrote: Thu Mar 02, 2023 6:43 pm I bought some of the 2053 TIPS at auction in mid Feb and am looking to add some more. Now that they have settled on 2/28/23, I do see them on Fidelity secondary market. However, for the past 2 days, I've seen very limited bids/asks with only quantity of 50 or 75. Does it generally take time for the depth of book to fill in like the rest of the TIPS?
That's a great question. Market is closed, but what I see now is no depth of book at all. Just min qty 50.

Let's take a look tomorrow.
Still showing only qty of 50 or 75 for bids and asks on Fidelity while market is open.
Lyrrad
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Re: Trading Treasuries (nominal and TIPS)

Post by Lyrrad »

Kevin M wrote: Fri Mar 03, 2023 12:38 am
kalarama wrote: Thu Mar 02, 2023 6:43 pm I bought some of the 2053 TIPS at auction in mid Feb and am looking to add some more. Now that they have settled on 2/28/23, I do see them on Fidelity secondary market. However, for the past 2 days, I've seen very limited bids/asks with only quantity of 50 or 75. Does it generally take time for the depth of book to fill in like the rest of the TIPS?
That's a great question. Market is closed, but what I see now is no depth of book at all. Just min qty 50.

Let's take a look tomorrow.
Looks like Vanguard and Fidelity have a pretty shallow book right now, with min quantities of 50.

Schwab is much better, offering the almost ask price for min-quantity of 1, and a better bid price.
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

Lyrrad wrote: Fri Mar 03, 2023 10:49 am
Kevin M wrote: Fri Mar 03, 2023 12:38 am
kalarama wrote: Thu Mar 02, 2023 6:43 pm I bought some of the 2053 TIPS at auction in mid Feb and am looking to add some more. Now that they have settled on 2/28/23, I do see them on Fidelity secondary market. However, for the past 2 days, I've seen very limited bids/asks with only quantity of 50 or 75. Does it generally take time for the depth of book to fill in like the rest of the TIPS?
That's a great question. Market is closed, but what I see now is no depth of book at all. Just min qty 50.

Let's take a look tomorrow.
Looks like Vanguard and Fidelity have a pretty shallow book right now, with min quantities of 50.

Schwab is much better, offering the almost ask price for min-quantity of 1, and a better bid price.
Yes, the Schwab price difference for 1 vs. 50 is so small it's a round-off error on the YTM, both quantities showed 1.519 YTM when I looked. Best price was 99.538 for 50 vs. 99.547 for 1.

Refreshing both at the same time, the Schwab ask yield was always very slightly better for min. 1 than Fidelity with 50 or 75 (by 0.002% or 0.003%).
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

By contrast, the 2052 TIPS has a decent book at Fidelity, with yield for min qty 1 of 1.500 compared to high yield of 1.503 for min qty 50. So, it seems that it is just a matter of time for a decent book to develop.

Schwab historically has had best pricing for min qty 1 (typically as good or better than a larger quantity) for nominals, and it seems that they are carrying on that tradition for TIPS.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by exodusing »

Why might a bill be trading at a much higher yield than bonds or notes of the same maturity? For example, as of early this morning, according to the WSJ, there are four Treasuries maturing 8/31/2023. Three bonds or notes with yields of 5.078, 5.088 and 5.092, and one bill with yield of 5.134. That's a 14 bp spread among the bonds and notes and a 42 bp spread from the highest bond or note to the bill. More recently (according to Kevin in another thread), for these four treasuries, the bill has a yield of 5.109, and three notes have yields of 5.033, 5.035, 5.033, which is a spread of 74 bps.

Is this likely to be some technical issue or liquidity or ?
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

As I mentioned, bills often have higher yields than notes or bonds of same maturity. Liquidity certainly is a factor. Also, as I said in the other thread, I don't worry about why, I just buy the one with the highest yield, which sometimes is a bill, and sometimes a note or bond.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by exodusing »

I'd think everyone would pick the one with the highest yield (which would tend to equalize yields), unless there was a significant difference in liquidity (or some identifiable factor), but I have a hard time understanding a spread that large in this context. I like understanding these things, even if doesn't make a difference in practice.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

I'd like to understand it better too, but there are so many factors that affect yields that I can't understand them all. If you figure out more, please share.

At any rate, here are yields for all Treasuries with maturities out to about 12 months:

Image

Lots of variability.

Even within just bills, there is surprising variability:

Image

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Re: Trading Treasuries (nominal and TIPS)

Post by erp »

exodusing wrote: Fri Mar 03, 2023 12:30 pm Why might a bill be trading at a much higher yield than bonds or notes of the same maturity? For example, as of early this morning, according to the WSJ, there are four Treasuries maturing 8/31/2023. Three bonds or notes with yields of 5.078, 5.088 and 5.092, and one bill with yield of 5.134. That's a 14 bp spread among the bonds and notes and a 42 bp spread from the highest bond or note to the bill. More recently (according to Kevin in another thread), for these four treasuries, the bill has a yield of 5.109, and three notes have yields of 5.033, 5.035, 5.033, which is a spread of 74 bps.

Is this likely to be some technical issue or liquidity or ?
Wow, you mean 4.2bp and 7.4bp spread. On 100k held for 6 months that's only $21 and $37. That probably falls within the bid/ask on any one of these.
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

Kevin M wrote: Fri Mar 03, 2023 11:51 am Schwab historically has had best pricing for min qty 1 (typically as good or better than a larger quantity) for nominals, and it seems that they are carrying on that tradition for TIPS
I have a very vague remembrance that the other sides of the bid/ask at Schwab were from Schwab itself. The idea was to give the small investors a break.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
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Re: Trading Treasuries (nominal and TIPS)

Post by exodusing »

erp wrote: Fri Mar 03, 2023 2:06 pm
exodusing wrote: Fri Mar 03, 2023 12:30 pm Why might a bill be trading at a much higher yield than bonds or notes of the same maturity? For example, as of early this morning, according to the WSJ, there are four Treasuries maturing 8/31/2023. Three bonds or notes with yields of 5.078, 5.088 and 5.092, and one bill with yield of 5.134. That's a 14 bp spread among the bonds and notes and a 42 bp spread from the highest bond or note to the bill. More recently (according to Kevin in another thread), for these four treasuries, the bill has a yield of 5.109, and three notes have yields of 5.033, 5.035, 5.033, which is a spread of 74 bps.

Is this likely to be some technical issue or liquidity or ?
Wow, you mean 4.2bp and 7.4bp spread. On 100k held for 6 months that's only $21 and $37. That probably falls within the bid/ask on any one of these.
D'oh. You are of course correct, bps are hundredths, not thousandths. Sorry for the confusion.
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

TheTimeLord wrote: Fri Mar 03, 2023 10:14 am Anyone else looking at participating in next week's 3 yr. auction?
It is auction day and my order is in. Order pending execution and we had a nice little rate bump this morning. Looking forward to see what the rate will be. :beer
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

TheTimeLord wrote: Tue Mar 07, 2023 8:27 am
TheTimeLord wrote: Fri Mar 03, 2023 10:14 am Anyone else looking at participating in next week's 3 yr. auction?
It is auction day and my order is in. Order pending execution and we had a nice little rate bump this morning. Looking forward to see what the rate will be. :beer
Price = 99.972290, yield = 4.635%, coupon = 4.625%.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

Kevin M wrote: Tue Mar 07, 2023 12:11 pm
TheTimeLord wrote: Tue Mar 07, 2023 8:27 am
TheTimeLord wrote: Fri Mar 03, 2023 10:14 am Anyone else looking at participating in next week's 3 yr. auction?
It is auction day and my order is in. Order pending execution and we had a nice little rate bump this morning. Looking forward to see what the rate will be. :beer
Price = 99.972290, yield = 4.635%, coupon = 4.625%.
Very pleased considering the action I was seeing Friday and yesterday. Trivia, but isn't that the same coupon from the most recent 2 yr. auction?
https://www.treasurydirect.gov/instit/a ... 0307_1.pdf
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

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

Post by exodusing »

I'd like to buy some T-bills maturing in April. On Vanguard's website I choose the 4/25/2023. I can choose from the following picture. I choose the lowest price (first row). On the next screen I fill in the box to choose $50,000 face amount and get "The best price for the quantity you've entered is shown. Please note that a better price is available for a different quantity. Click cancel to review search results and available prices and quantities. (29341)". Is it saying that I'd have to buy $1,00,000 face amount (1,000 x $1,000) to get the lowest price, since that's the minimum quantity for $99.394 and if I want just $50,000 ignore the message and proceed?

Image
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

exodusing wrote: Wed Mar 08, 2023 11:07 am I'd like to buy some T-bills maturing in April. On Vanguard's website I choose the 4/25/2023. I can choose from the following picture. I choose the lowest price (first row). On the next screen I fill in the box to choose $50,000 face amount and get "The best price for the quantity you've entered is shown. Please note that a better price is available for a different quantity. Click cancel to review search results and available prices and quantities. (29341)". Is it saying that I'd have to buy $1,00,000 face amount (1,000 x $1,000) to get the lowest price, since that's the minimum quantity for $99.394 and if I want just $50,000 ignore the message and proceed?

Image
You want to buy quantity 50, which is $50,000 face value. So, you must select the 3rd row for min qty 1. The instruction was to click cancel and try again. On next try, select the offer with the correct min qty.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by exodusing »

Kevin M wrote: Wed Mar 08, 2023 11:59 am
exodusing wrote: Wed Mar 08, 2023 11:07 am I'd like to buy some T-bills maturing in April. On Vanguard's website I choose the 4/25/2023. I can choose from the following picture. I choose the lowest price (first row). On the next screen I fill in the box to choose $50,000 face amount and get "The best price for the quantity you've entered is shown. Please note that a better price is available for a different quantity. Click cancel to review search results and available prices and quantities. (29341)". Is it saying that I'd have to buy $1,00,000 face amount (1,000 x $1,000) to get the lowest price, since that's the minimum quantity for $99.394 and if I want just $50,000 ignore the message and proceed?

Image
You want to buy quantity 50, which is $50,000 face value. So, you must select the 3rd row for min qty 1. The instruction was to click cancel and try again. On next try, select the offer with the correct min qty.
It says it's giving me the best price for 50, which is 99.395, even though I clicked a different row (or if I just click buy without expanding the choices). If I want the lower price (99.394) I'd have to increase the quantity to 1,000, which is $1,000,000 face amount. At least, that's how I'm interpreting, which seems consistent with your reply if I'm reading correctly.

Just trying to understand what it's saying.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

^Gotcha. I just did a bill purchase at Vanguard to verify, and it works as you say.

This was CUSIP 912796XQ7, a bill maturing 7/13/2023. High yield was 5.029 for min qty 1,000, which I clicked buy on. I bought 10, and yield was 5.002 (min qty 1). The order went through fine.
If I make a calculation error, #Cruncher probably will let me know.
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