Treasury Bills Adjust For Holidays

Treasury Bills are usually issued on the same day each week, making it easy to re-invest T-Bills at maturity. Someone brought up a good point – what if that day is a holiday? Reader Dan pointed out that the Treasury already thought of that, and adjusts the issue and/or maturity 1 day accordingly. For example, 4-week (28-day) T-Bills are usually issued and matured on Thursday, but next week Thursday 11/24 is Thanksgiving. So, the T-Bill issued on 10/27 is actually a 29-day T-Bill, maturing on Friday 11/25. Accordingly, there is a 27-day T-Bill scheduled for issue on that Friday too. They all match up, so at least that’s one less thing to worry about.

I’ve also added a new category devoted to Treasury Bills and Bonds and moved all related entries there.

Posted in Treasury Bills and Bonds | 3 Comments »

Automatically Reinvesting Treasury Bills: Easy

It turns out automatically reinvesting Treasury Bills upon maturity is pretty straightforward, according to this TreasuryDirect link. I must say, there is a lot of information on all those government sites, but they sure make it hard to find it!

For example, for 4-week T-Bills, they both mature and issue on Thursdays. But if you set your maturing T-Bills to pay out into a Certificate of Indebtedness (C of I), and your to-be-issued T-Bill to fund from the same C of I, then the maturing T-Bill will first pay out money into the account before the 2nd one takes it out. So (most of) your money will effectively be “reinvested” into another T-Bill.
Read the rest of this entry…

Posted in Treasury Bills and Bonds | 18 Comments »

T-Bill Ladder Halfway Done, Treasury Auction Results Out

Thanks to reader Brent who reminded me that the new Treasury Bill auction results are out today. The 4-week, 13-week, and 26-week are paying 3.997%, 4.004%, and 4.345% respectively. This bodes very well for the 4-week T-Bill ladder I am currently building. Last week I bought a $1,000 4-week T-Bill at 3.885%, this week I’m getting another one at 3.997%, which is the equivalent bank rate of 4.54% for my tax situation. I’m going to be setting up a 4-week auto-renewing ladder at TreasuryDirect once I have 4 of these bought. That way they’ll just cycle through each other, renewing automatically at maturity, and I won’t have a thing to do but watch the interest pile up (and faster than at Emigrent Direct). More later.

Posted in Treasury Bills and Bonds | 13 Comments »

How To Predict T-Bill Rates?

A commenter asked how do you predict rates for T-Bills, which I have been buying. I have no idea. I’ve never even taken Econ 101. I did a search and found this [pdf] article titled ‘Using Federal Funds Futures Rates to Predict Federal Reserve Actions’. If someone wants to read that and see if it helps, be my guest. From what I read, the conclusion was “yeah you can try, but not very accurately”.

Since I’m on an Excel kick right now, I found some historical data on the Fed Funds Rate and previous 4-Week Treasury Bill rates. I graphed them together, along with a trendline of the 4-Week T-Bill rates:
Read the rest of this entry…

Posted in Treasury Bills and Bonds | No Comments »

Treasury Bill and Bank Interest Rate Comparisons

I was bored, so I did some comparison of T-Bill rates vs. equivalent bank rates and actual bank account rates for various combinations of Federal and State tax brackets. Yes, I’m weird. As expected, if you don’t pay state or local taxes, T-Bills are pretty bland. However, if you are in a higher income tax bracket or in a heavily-taxed area, they can become pretty attractive.
Read the rest of this entry…

Posted in Treasury Bills and Bonds | 8 Comments »

4-Week T-Bill Purchased: Very Easy

So I the $1,000 28-day T-Bill that I scheduled for purchase last week was issued today without a hitch. I knew the rate was 3.885% (exempt from state and local income taxes), as the auction was on Tuesday and announced on their Recent T-Bill Auction Results page. The issue date was today, and right on time today I see a debit of $997.03 from my checking account. It also showed up online in my Treasury Direct account. After 28 days, on 12/8, I will have an even $1,000. Not so exciting when you think of it as less than 3 bucks.

But if you think of it as an equivalent CD return, that’s the same return as a 4.41% 1-month bank CD, based on a 25% marginal federal tax bracket and 9% marginal state tax. (If you are in higher brackets your return is even better). I’m thinking a T-Bill ladder with 28-day T-Bill rungs…
Read the rest of this entry…

Posted in Treasury Bills and Bonds | 19 Comments »

Finding the Equivalent Bank Interest Rates For Savings Bonds

One perk of U.S. Savings Bonds (USSB) and Treasury Bills is that they are exempt from state and local income taxes. For comparison, what would be useful is a quick way of comparing those tax-advantaged rates with the regular interest rates from a bank savings account or CD. So let’s do that. To start, we agree that we want find the equivalent bank rate that gives us the same after-tax return.

AfterTaxReturn_Bank = AfterTaxReturn_USSB

Rate_Bank * (1 – Fed Tax Rate – State/Local Tax Rate) =
Rate_USSB * (1 – Fed Tax Rate)

This gives us:
Read the rest of this entry…

Posted in Savings Bonds, Treasury Bills and Bonds | 28 Comments »

U.S. Treasury Bills: Possible Worthwhile Investment

I was snooping around the U.S. Treasury website looking up stuff on potentially laddering I-Bonds, when I came across Treasury Bills again. Treasury Bills are short-term investments (from 4-26 weeks usually) that common folk like us can also buy at TreasuryDirect.gov. The minimum investment is $1,000, and you buy them at a discount to their face value. In their example, you might pay $970 for a $1,000 T-Bill. I’ve never really bothered to learn much about them though, since their yields recently have beem much lower than online savings accounts like EmigrantDirect. For example, a recent rate for a 29-day T-Bill is 3.696%.

But, one key thing is that interest earned from T-Bills are exempt from state and local income tax. For example, if you were in the 28% federal tax bracket, and in a 10% marginal state income tax bracket, that’s 3.696% turns into 4.29%!!
Read the rest of this entry…

Posted in Treasury Bills and Bonds | 7 Comments »