Savings/investments/bonds Master Thread.

[CountValentine]

In Aramaic your post would be called הוא מתיב לה והוא מפרק לה. (You asked the question and gave the answer).

Yes. In a rising rate environment (how much longer?) laddering makes sense. But a true ladder requires spreading out the maturities, and then reinvesting the maturing bonds into the longest duration, so that one always has rungs maturing at the same fixed intervals. Once rates stop rising you want to be locked into as long as possible.

The weird thing in the current environment is that there's often no positive spread (and there might actually be a negative spread in some cases) for corporates over treasuries.

Here is the issue with ladders right now. Short term rates are higher than long term rates.

[aygart]

Yield to maturity. You can sell at any time.

Yes but at a lower value

[CountValentine]

Yes but at a lower value

That is why it is important to have a plan. If you are short term, holding until maturity and constantly buying/rolling over then you want rates to go up.

[ExGingi]

Here is the issue with ladders right now. Short term rates are higher than long term rates.

That won't last forever, and not knowing when it will turn around is the reason for laddering rather than just buying short date and constantly rolling.

[CountValentine]

That won't last forever, and not knowing when it will turn around is the reason for laddering rather than just buying short date and constantly rolling.

There will have to be a good turn for laddering to beat what I am doing now. I will then ladder longer term.
I don't expect rates to turn on a dime, but I could be wrong.

[nucheiner]

Does it ever make sense to sell tBills and replace them with new ones which are offering a higher rate? Or generally the originals lost some value.

For instance if I have tbills which are maturing on 3/26 @ a yield (YTW) of 4.4 and there are now better offerings and id rather have that money earning 4.72 maturing on 5/27,( a later maturity date, but dont care.)

Makes sense to sell and rebuy? Having a hard time on Fidelity figuring out what my earnings were for the holding period and if this is worth it. There are Tax implications I believe, as earnings would be considered as capital gains and subject to State tax.

[aygart]

Does it ever make sense to sell tBills and replace them with new ones which are offering a higher rate? Or generally the originals lost some value.

For instance if I have tbills which are maturing on 3/26 @ a yield (YTW) of 4.4 and there are now better offerings and id rather have that money earning 4.72 maturing on 5/27,( a later maturity date, but dont care.)

Makes sense to sell and rebuy? Having a hard time on Fidelity figuring out what my earnings were for the holding period and if this is worth it. There are Tax implications I believe, as earnings would be considered as capital gains and subject to State tax.

If the yield went down then the value went up

[CountValentine]

If the yield went down then the value went up

Interest rates went up.

[CountValentine]

Having a hard time on Fidelity figuring out what my earnings were for the holding period and if this is worth it.

What about the bid/ask price for that maturity. Compare to what it was when you bought it and now?

[nucheiner]

What about the bid/ask price for that maturity. Compare to what it was when you bought it and now?

Im not figuring this out.

I can sell these for 99.158. Worth it?

UNITED STATES TREAS BILLS ZERO CPN 0.00000% 03/21/2023
Acquired   Term   $ Total Gain/Loss   % Total Gain/Loss   Current Value   Quantity   Average Cost Basis   Cost Basis Total
2022-11-30   Short   +$117.83   +0.48%   $24,790.25   25,000   $0.99   $24,672.42

[haltkup]

Im not figuring this out.

I can sell these for 99.158. Worth it?

UNITED STATES TREAS BILLS ZERO CPN 0.00000% 03/21/2023
Acquired   Term   $ Total Gain/Loss   % Total Gain/Loss   Current Value   Quantity   Average Cost Basis   Cost Basis Total
2022-11-30   Short   +$117.83   +0.48%   $24,790.25   25,000   $0.99   $24,672.42

if you hold it to maturity of around 70 days, you get 100, that's around 4.5% risk free return.
your call if you need liquidity or if you have a better investment opportunity

[AsherO]

All of the yields discussed in this thread are annualized, right? (Meaning for a 26 week bond it will be approximately half that figure), right?

[ExGingi]

All of the yields discussed in this thread are annualized, right? (Meaning for a 26 week bond it will be approximately half that figure), right?

Obviously.

[ExGingi]

Im not figuring this out.

I can sell these for 99.158. Worth it?

UNITED STATES TREAS BILLS ZERO CPN 0.00000% 03/21/2023
Acquired   Term   $ Total Gain/Loss   % Total Gain/Loss   Current Value   Quantity   Average Cost Basis   Cost Basis Total
2022-11-30   Short   +$117.83   +0.48%   $24,790.25   25,000   $0.99   $24,672.42

My 2˘:

The bond market is known as where "the smart money" trades and invests. It is a huge market (and in the case of US Treasuries - probably the most liquid market). As pointed out by @AsherO we're discussing annualized yields. Unless you are trading huge sums (in which case I doubt you'd be asking on DDF), leave the trading to the pros (especially when looking at short maturities).

As I mentioned above, I've taken advantage in the past. One example is when the Deep Water Horizon leak happened. BP stock and bonds took a major hit. With Obama in office I was scared of the possibility of a progressive administration taking extreme steps that could force bankruptcy, so I decided to buy bonds. I bought two tranches, IIRC I bought a 4 year and 5 year maturity (or maybe it was shorter) at a YTM of around 8%. When things were under control values recovered. Had I sold the bonds at that point my IRR would have probably been much higher. But I am not a professional bond trader, and selling would just mean I need to find an alternative. So I held. I think most non-pros would do the same.

[CountValentine]

Here is my approach. I put xx in 13/26 week t-bills each week. Am I satisfied with the current yield? I am so I don't worry about the day-to-day change. This is liquid funds that produce extra monthly income.

If I had to worry about day-to day fluctuations I would go crazy trying to figure out in this example why one of my 26-week t-bills is losing money today?

[sam2015]

Does it ever make sense to sell tBills and replace them with new ones which are offering a higher rate? Or generally the originals lost some value.

For instance if I have tbills which are maturing on 3/26 @ a yield (YTW) of 4.4 and there are now better offerings and id rather have that money earning 4.72 maturing on 5/27,( a later maturity date, but dont care.)

Makes sense to sell and rebuy? Having a hard time on Fidelity figuring out what my earnings were for the holding period and if this is worth it. There are Tax implications I believe, as earnings would be considered as capital gains and subject to State tax.

Usually not. Whatever you will be making with the new better rate will mean that much you will have to sell your current bills at a discount.

[ExGingi]

This (or similar) is where I start forming my shopping list.

[CountValentine]

This (or similar) is where I start forming my shopping list.

Same and that is why I am short term.
What is the time frame for your ladders?

[ExGingi]

Same and that is why I am short term.
What is the time frame for your ladders?

Right now 1yr (3 month intervals). I personally think the fed is strongly determined on breaking something, and won't stop until that break is clear to everyone. I also think that inflation is on its way down (probably quite significantly).

I tend to agree with the theme in this thread:

https://twitter.com/biancoresearch/status/1613215364095086601

Which means that what the Fed really wants is for people to stop thinking that the era of cheap money and asset bubbles isn't over, and that the party will resume shortly after a brief hiatus.

[CountValentine]

I know some are waiting to buy I-bonds at the end of the month for their 10k 2023 allotment. Is that a good idea with rates looking like they are going to drop big time? Is the party over?