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Buying Treasury floating rate notes at brokerages

Sven
in Fund Discussions
We have been buying treasury bills through our brokerages at auction. The expected yields are posted prior to the auction dates. Sometime one may get a slightly higher yield at auction. Over the past several years, it was advantageous to buy short term T bills and getting higher yield than those from money market. Today, the yield curve has normalized from the inverted yield curve. and we wish to extend the treasury duration beyond one year.

My question is that I do not see treasury floating rate notes (FRN) posted in auction at Fidelity and Vanguard brokerages. According to the auction schedule from TreasuryDirect is posted below, the FRN should be available at brokerages. I have no interest to buy from TreasuryDirect.

https://home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf

Please advise. Thank you.

Comments

  • Tarwheel
    At Fidelity, I think you have to go through their trading desk by phone to buy Treasury floaters and TIPs, but you can purchase through them.
  • Sven
    Thanks. FRNs are available on the secondary market, but I wish to buy them at auction for better pricing. In addition, there are added fees when purchased through an agent. Buying at auction does not incur transaction fees. Small investors can construct T bills ladder out to several years to meet their income needs.
  • yogibearbullyogibearbull
    Fido charges $19.95 for buying Treasuries through agents. FRNs can be bought only through an agent, not online.

    FRN USFR has 15 bps ER.

    Breakeven is 100*19.95/0.15 = $13,300.

    So, buying in amounts larger than $13.3K via Fido agent is worthwhile. Below that, buy USFR.
  • Sven
    FRNs can be bought only through an agent, not online.
    @yogibb, thank you. I suspect that is the case. Wonder why?

    I am already using USFR, but wanting to save 0.15% fees. Next auction is at end of February 20205.
  • yogibearbullyogibearbull
    @Sven, Schwab allows online purchase for FRNs (it calls them Treasury - Var).
  • BaluBalu
    When you are required to have an agent place a trade, I ask the agent if he would waive the fees and they usually do.

    FRNs reset weekly with every 13 wk Treasury bill auction.

    What are you trying to accomplish by wanting to increase Duration using FRNs? In other words, what interest rate bets are you trying to make using FRNs?
  • yogibearbullyogibearbull
    edited January 25
    @BaluBalu, but due to weekly reset feature to 3m T-Bills, FRN duration is 1 week (not 2 years). Buying FRNs at auction at Schwab would be commission-free, so 15 bps in ER for USFR would be saved. The other thing is the (small) spread that is fixed at auction - I haven't been tracking those.
  • BaluBalu
    edited January 25
    YBB, I think the OP wants them at Fido and VG. I no longer buy any bonds at Schwab. I just own bunch of USFR - I get that 15 bps is nothing to sneeze about and one does not have to worry about cap gain distributions from USFR. Your breakevens calc is helpful to readers. Said differently, one can save $3,000 over the two year period buying FRNs instead of USFR.

    Please elaborate on the spread you mentioned.
  • yogibearbullyogibearbull
    Treasury calls the "fixed or base" rate set at FRN auction "spread".
    https://treasurydirect.gov/marketable-securities/floating-rate-notes/
  • BaluBalu
    Got it.
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