Treasury duration?
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Treasury duration?
Hi all -
I've been creating a Tbill ladder to take advantage of the rising rate environment, generally investing tranches into 17 week T-bills. I'm not quite sure how to decide when to transition to longer duration treasuries and would be interested in how others are thinking about this.
Thanks!
I've been creating a Tbill ladder to take advantage of the rising rate environment, generally investing tranches into 17 week T-bills. I'm not quite sure how to decide when to transition to longer duration treasuries and would be interested in how others are thinking about this.
Thanks!
Re: Treasury duration?
I do not try to time the bond market or the duration of my holdings.
Stay hydrated; don't sweat the small stuff
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Re: Treasury duration?
Frankly honest, treasury bills and treasury bonds they are two separate propositions of obtaining returns.
- Short-term returns (say 6 months): treasury bills earn according to their yield; treasury bonds obtain yield +- market pricing (which dominates the short-term returns).
- Very long-term returns (say 30 years): treasury bills earn according to the yield that cumulates over the three decades (being driven by the Fed Rate at nearly every turn); treasury bonds obtain their fixed yield as stated.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
Re: Treasury duration?
I have a 5 year ladder that gets me to social security. Initially the fed said they were raising rates so I kept my duration shorter but broke the amount into smaller denominations. (not sure how we consider it market timing when the federal government tells you what they are doing)
As the fed has slowed the rate climb, I have made an assumption we are approaching the end. the end may be 2%- 2X% higher but I don't know that.
Because i put the smaller denominations over a period of time, I have a number of Treasuries coming due over 2023.
am taking those and effectively now dollar cost averaging into rates from 1-3 years out to fill my ladder. I have a specific amount of cash I want for each year and am working to fill it out. (years 4 and 5 are covered by Ibonds as they will then be past the 5 year holding period).
will I get the highest rate? No, will I average in and be happy? so far so good! I am currently averaging about 4.2% not wonderful,, but not bad.(at least at the moment).... and targeting 2-3 year treasuries now
As the fed has slowed the rate climb, I have made an assumption we are approaching the end. the end may be 2%- 2X% higher but I don't know that.
Because i put the smaller denominations over a period of time, I have a number of Treasuries coming due over 2023.
am taking those and effectively now dollar cost averaging into rates from 1-3 years out to fill my ladder. I have a specific amount of cash I want for each year and am working to fill it out. (years 4 and 5 are covered by Ibonds as they will then be past the 5 year holding period).
will I get the highest rate? No, will I average in and be happy? so far so good! I am currently averaging about 4.2% not wonderful,, but not bad.(at least at the moment).... and targeting 2-3 year treasuries now
Last edited by 1moreyr on Thu Jan 26, 2023 9:07 pm, edited 1 time in total.
Re: Treasury duration?
I like that the Fed tells the world what they’re doing…
Their tools are very limited and they don’t want to spook the financial markets.
"I started with nothing and I still have most of it left."
Re: Treasury duration?
I do agree, and you may as well use it to your advantage..... imagine if someone could actually tell you the market direction?
Re: Treasury duration?
Makes me wonder how many people have been using leverage to time the bond market, and just exactly how and when that's going to blow up in all our faces.1moreyr wrote: ↑Thu Jan 26, 2023 9:04 pmI do agree, and you may as well use it to your advantage..... imagine if someone could actually tell you the market direction?
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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Re: Treasury duration?
I have stayed with no leverage (except for an unintended lack of funds in October). So I doubt it will be hurting me whatever it does.Beensabu wrote: ↑Fri Jan 27, 2023 12:13 amMakes me wonder how many people have been using leverage to time the bond market, and just exactly how and when that's going to blow up in all our faces.1moreyr wrote: ↑Thu Jan 26, 2023 9:04 pmI do agree, and you may as well use it to your advantage..... imagine if someone could actually tell you the market direction?
Despite the disclosed plan, not everything goes according to the plan. That is why there is still risk.
All of this discussion is moot; even if one knows the likely direction, it can be priced so that the risk is asymmetrical to account for it. That is, more of a biased coin flip.
Really, this is speculative.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
Re: Treasury duration?
Beensabu wrote: ↑Fri Jan 27, 2023 12:13 amMakes me wonder how many people have been using leverage to time the bond market, and just exactly how and when that's going to blow up in all our faces.1moreyr wrote: ↑Thu Jan 26, 2023 9:04 pmI do agree, and you may as well use it to your advantage..... imagine if someone could actually tell you the market direction?
[/quote
let me be clear,,,, I don't advocate timing the market, but when rates are less than 1% and the fed has stated raising rates to cool the economy, it sounds like a bad time to lock in $250K at 1% for a bond ladder. (as I entered retirement 2/20, I had sold some equity to fund it)
did i end up with some 3% treasuries on my DCA up? sure but having an overall average 4% feels ok right now. At least better than 1% (and i do have a share of ibonds)
as a BH, i have never used leverage in investments. but that's me.
Re: Treasury duration?
Not quite a complete answer to your question, but I've recently been buying 52 week T bills that mature at the end of January 2024. This defers the taxability of interest into the next calendar year, plus I can avoid T-bills maturing during any debt ceiling theatrics which might take place in the second half of this year.Mayflower5405 wrote: ↑Thu Jan 26, 2023 10:27 am Hi all -
I've been creating a Tbill ladder to take advantage of the rising rate environment, generally investing tranches into 17 week T-bills. I'm not quite sure how to decide when to transition to longer duration treasuries and would be interested in how others are thinking about this.
Thanks!
Re: Treasury duration?
secondopinion wrote: ↑Fri Jan 27, 2023 1:20 amI have stayed with no leverage (except for an unintended lack of funds in October). So I doubt it will be hurting me whatever it does.
I was thinking more along the lines of LTCM 2.0.
Sounds like your answer to the OP would be "a few months ago".1moreyr wrote: ↑Sat Jan 28, 2023 8:19 am
let me be clear,,,, I don't advocate timing the market, but when rates are less than 1% and the fed has stated raising rates to cool the economy, it sounds like a bad time to lock in $250K at 1% for a bond ladder. (as I entered retirement 2/20, I had sold some equity to fund it)
did i end up with some 3% treasuries on my DCA up? sure but having an overall average 4% feels ok right now. At least better than 1% (and i do have a share of ibonds)
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
Re: Treasury duration?
Short term needs; short term treasuries.Mayflower5405 wrote: ↑Thu Jan 26, 2023 10:27 am Hi all -
I've been creating a Tbill ladder to take advantage of the rising rate environment, generally investing tranches into 17 week T-bills. I'm not quite sure how to decide when to transition to longer duration treasuries and would be interested in how others are thinking about this.
Thanks!
Long term needs…same deal.
Consider duration matching.
Lock in good rates.
Include TIPS.
Re: Treasury duration?
I would think we are closer to the top than the bottom and I hope i am not wrong.... so yea,,, I am locking in for longer terms now that i was 6 months ago.... 18-24 months easily 36 months? i am not smart enough to knowBeensabu wrote: ↑Sat Jan 28, 2023 3:27 pmsecondopinion wrote: ↑Fri Jan 27, 2023 1:20 amI have stayed with no leverage (except for an unintended lack of funds in October). So I doubt it will be hurting me whatever it does.I was thinking more along the lines of LTCM 2.0.
Sounds like your answer to the OP would be "a few months ago".1moreyr wrote: ↑Sat Jan 28, 2023 8:19 am
let me be clear,,,, I don't advocate timing the market, but when rates are less than 1% and the fed has stated raising rates to cool the economy, it sounds like a bad time to lock in $250K at 1% for a bond ladder. (as I entered retirement 2/20, I had sold some equity to fund it)
did i end up with some 3% treasuries on my DCA up? sure but having an overall average 4% feels ok right now. At least better than 1% (and i do have a share of ibonds)
keep in mind, if you break up into 10,000 increments, the difference between 4% and 5% is $100/year.... not worth losing sleep if you are DCAing in
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Re: Treasury duration?
My thinking is to keep adding funds to the intermediate-term treasury bond ETFs that constitute the bond portion of my portfolio. Why do you need a ladder? Why are you playing with T-bills?Mayflower5405 wrote: ↑Thu Jan 26, 2023 10:27 am Hi all -
I've been creating a Tbill ladder to take advantage of the rising rate environment, generally investing tranches into 17 week T-bills. I'm not quite sure how to decide when to transition to longer duration treasuries and would be interested in how others are thinking about this.
Thanks!
Re: Treasury duration?
Yet another game only worth playing if you're rich enough for it to matter, which also means you're rich enough for it not to matter too much if it turns out you're bad at the game.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
Re: Treasury duration?
ok, you have found fault twice.. what's your alternative? constructive answers beat finding fault....The OP asked for advice... I gave him a point of view.
it has nothing to do with being rich... pick your increment 500, 1000, 2,000 10,000 . my example was to make a point on keeping investing in perspective........... investing is a game of inches..... It's not how much you make,,,, it's what you save...and saving a little at a time,,, ends up being a lot....
i remember raising my monthly savings by $20..then 40/month .. then 50..... it eventually added up so i could retire at 56....I didn't shrug my shoulders and say... early retirement is only for the rich........
But i will say in other than BH circles, yea I would be considered well off ...............now
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Re: Treasury duration?
Goodness. Am I finding fault?1moreyr wrote: ↑Sat Jan 28, 2023 8:37 pmok, you have found fault twice.. what's your alternative? constructive answers beat finding fault....The OP asked for advice... I gave him a point of view.
Yes, you did give a point of view.
I just latched on to your "but maybe it doesn't make much of a difference" when it comes to lesser vs. greater dollar amounts. So is there a point to playing the bond timing game vs. picking a fixed income allocation and contributing to it?
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
Re: Treasury duration?
in picking one and contributing to it,, there we agree.... The OP was talking about what to do with current 'tranches of money." and the current environment...Beensabu wrote: ↑Sat Jan 28, 2023 10:25 pmGoodness. Am I finding fault?1moreyr wrote: ↑Sat Jan 28, 2023 8:37 pmok, you have found fault twice.. what's your alternative? constructive answers beat finding fault....The OP asked for advice... I gave him a point of view.
Yes, you did give a point of view.
I just latched on to your "but maybe it doesn't make much of a difference" when it comes to lesser vs. greater dollar amounts. So is there a point to playing the bond timing game vs. picking a fixed income allocation and contributing to it?
To the OP
the fed has announced they are slowing the increases and are planning on holding the rates higher for a longer period of time. This may not be the top but it seems to be closer to the top than 6 months ago. in my opinion
My current plan is....
I will take the current 4% and continue to dollar cost my way through with a 20% allocation of 1-3 year horizon Tbills as well as a 5% allocation of Ibonds and 15% allocation in VBTLX with a 6 year duration for good measure...good luck