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3 month T bill purchase today

I made sure I punched at auction & received back what appears to be a one year T bill with 3 months left.

Security: U S TREASURY BILL 0% 11/30/23 12/01/22 Price was $98.65

The T bill dated 12/01/22 shows 4.49 - 4.66 Bank discount & Coupon equivalent

That is the daily rate on the secondary market quotation on most recent auction of T-bills.

From conversation June 8 added below. Why was this a secondary purchase & not the first time it has happen.
I believe YBB gave me a follow up link for whom to contact.


Derf
June 8 in Other Investing Flag
Announcement 6/6, Auction 6/7 bought on 6/6 I received message today of purchased which showed 08/08/23 - 04/11/23. That appears to be a T-bill bought at market. Called VG today & rep said it was an auction purchase. I'll be calling tomorrow , bright & early to see if I can get a reason as to why this happened. If that T-bill was sold out, the order shouldn't have been filled. Maybe no fill or kill at VG ?
Anyone have any ideas ? Rep also mention it maybe a RO bill, reopened. If that is the case, wouldn't it show on the pre- schedule ?
Thanks, Derf

Comments

  • I just returned from VG & did the math. From what it cost me to purchase the T Bill I multiplied by 5.5% then divided by 4 , the 3 months of interest for which I will receive. I then I subtracted the cost from what it will pay when it matures & came within a buck/ Close enough for me.
    Sorry I brought this up again, Derf
    P.S. That still leaves the question, Why the dating issue ?
  • msf
    edited August 2023
    Today's auction shows the price for a 13 week T-bill (CUSIP 912796ZD4), maturing 11/30/23 was $98.650167. That seems to exactly match what you wrote you bought.

    Auction result:
    https://www.treasurydirect.gov/instit/annceresult/press/preanre/2023/R_20230828_3.pdf

    Announcement (original issue date 12/1/22):
    https://www.treasurydirect.gov/instit/annceresult/press/preanre/2023/A_20230824_3.pdf

    This security was auctioned off three times: originally as a 52 week T-bill (issued 12/1/22), then as a 26 week T-bill (issued 6/1/23), and now as a 13 week T-bill (to be issued 8/31/23).
    https://www.treasurydirect.gov/auctions/auction-query/?cusip=912796ZD4
  • T-Bill CUSIP Numbers - Matching

    Because of 13-wk, 26-wk, 52-wk T-Bill issuances, some maturing dates for 13-wk T-Bills will coincide with those for 26-wk and 52-wk T-Bills. Similar for 26-wk and 52-wk T-Bills.

    When the T-Bill maturity dates are the same, and the coupon rates are all 0% (because T-Bills are sold at discounts), Treasury uses the same CUSIP# for them. Treasury doesn't call these reopening, nor marks them as such in the Treasury Auction Schedule - in fact, Treasury says that T-Bills don't have reopening.

    So, how does one figure out what is going on?

    1. Matching T-Bill CUSIP# is one way but that is tedious, even with Treasury site CUSIP search. For example, a search on CUSIP# 912796ZD4 shows that related 13-wk, 26-wk, 52-wk have maturity dates of 11/30/23 (see this link by @msf).
    https://www.treasurydirect.gov/auctions/auction-query/?cusip=912796ZD4

    2. Comparing T-Bill Original Issue Dates with actual Issue Dates is another way, but that information is lost in the Treasury Auction Results data fields as there are other more important data for rates, spreads of bids, etc. However, the Treasury Auction Announcements have the Auction Date, Original Issue Date, actual Issue Date, and Maturity Date.

    13-wk Auction Announcement for 8/28/23 (Maturity 11/30/23)
    https://www.treasurydirect.gov/instit/annceresult/press/preanre/2023/A_20230824_3.pdf
    (Note that Original Issue Date and actual Issue Date don't match)

    52-wk Auction Announcement for 11/29/22 (Maturity 11/30/23)
    https://treasurydirect.gov/instit/annceresult/press/preanre/2022/A_20221123_3.pdf
    (Note that Original Issue Date and actual Issue Date match)

    One can also verify the the CUSIP# in these 13-wk and 52-wk Auction Announcements match.
  • @msf & @yogibearbull- I would really appreciate an explanation of buying at auction vs just buying at any time from a broker like Schwab... thanks!

  • @msf & @yogibearbull : Thanks for your replies, much appreciated !
    Have a great week, Derf
  • Forget that it's called an auction - that's just the way the Treasury sets the offering price of its bills, notes, and bonds. All retail investors get the same price at the auction; they don't bid.

    Conceptually, the difference between buying "at auction" and in the secondary market is the difference between buying a security when issued by an institution (i.e. the Treasury selling new bonds) and buying a security from someone who already owns the security.

    There are lots of small details that are different - auctions happen periodically, secondary market is continuous; auction price is approximate (you place your order knowing only roughly what the price will be), secondary market price is precise; auction purchases can be made through Treasury Direct as well as through a broker, secondary market purchases are through brokers only; and so on.

    Here's a good piece by The Finance Buff on secondary market Treasuries. Its length shows you why I'm not explaining more here. It's worth the read and should answer most of your questions.
    https://thefinancebuff.com/buy-treasury-secondary-market.html
  • edited August 2023
    I prefer Treasury Auctions when nearby (for 13-wk and 26-wk T-Bills, there are). There is a large supply and even much larger demand (often 2x-3x). EVERYBODY gets the same price whether buy they $100 (at Treasury Direct) or $1,000 (at brokerages) or $10 million (limit for noncompetitive orders), or $10+ million (competitive orders). So, the retail investors get a break.

    Treasuries bought at Treasury Direct must be held to maturity. If you want to sell before maturity, you have to transfer them to a brokerage and then sell. So, why not buy at brokerage (at Auction or in the secondary market) in the first place?

    Buying in the secondary market is continuous during the market hours, but there are bid-ask based on which Treasury you are buying and how much. Of course, there are no fees or commissions for them at major brokerages (as there are for bonds generally). Treasury ladders can be setup easily with secondary market purchases.

    Treasuries are exempt from state/local taxes.

    Unlike CDs, Treasury secondary markets are very liquid. So, T-Bill/Note should be preferred if their yields are close to those of the CDs. The CDs sales on secondary markets may be hit or miss - you may get lucky if there is a ready buyer, or may get a decent haircut. But T-Bill/Notes and CDs are to be held to maturity to the extent possible.
  • msf
    edited August 2023
    why not buy at brokerage (at Auction or in the secondary market) in the first place?

    A rhetorical question but one with a real answer. While many brokerages let you buy and sell Treasuries (at auction or in the secondary market) with no commission, some don't.

    For example, at Merrill if you want to buy an auction Treasury you have to go through a human being*. You will get charged a commission for that service. If the only accounts you have are at Merrill and at TreasuryDirect, you have three choices: (1) buy at TD, (2) pay a commission and buy at Merrill, or (3) open a new brokerage account.

    Buying at TreasuryDirect combines ease and economy in this rare confluence of circumstances. The moral of the story is to make sure that you can trade Treasuries commission-free at your brokerage.

    * Online auction Treasuries not available at Merrill according to The Finance Buff. I have not been able to find any information about upcoming auctions at merrilledge.com (i.e. I can't purchase online). While some brokerage review sites say that you can buy auction Treasuries online at Merrill, that appears to be based on a sloppily worded pricing list.
  • Buying T bills at auction through Schwab brokerage has no fee just like buying brokered CDs. There is a set schedule at the Treasury while CDs are not. https://home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf

    Newly issued short term T bills, 13 week and 26 week have their auction every Monday. It would be good idea to place your order on Sunday night and the order will be filled by end of Monday. Longer term T bills and notes have their schedule. Personally I buy 13 week, 26 week and 52 week T bills to construct ladders.

    Several advantages of T bills over CDs:
    1. after tax return since T bills are state tax-exempt.
    2. Liquidity. Easy to sell before maturity in secondary market.
    3. Large $ amount can be purchase at auction.

    Last year MFO have had several treads on T bills that provide additional details.
  • edited August 2023
    It should be obvious from the discussions so far, but I double-checked anyway. The following observations should be easy to remember.

    EVERY 13-wk T-Bill has the same CUSIP# as some 26-wk T-Bill.

    The 4th issuances of 13-wk and 26-wk T-bills have the same CUSIP# as some 52-wk T-Bill.

    But Treasury won't call these reopening (even when it may appear so to us). The only difference I see is that their amounts outstanding aren't combined. Also, some brokerage sites may fail to find all these CUSIPs (as the Treasury site does) - there was a discussion of this for Schwab in another thread.

    When Treasury uses the term reopening, it combines all issuances into a large total outstanding and Treasury says that it improves the liquidity of that Treasury issue. Treasury says that there are also (formal) reopening only for 2-Yr FRNs, 20-Yr & 30-Yr T-Bonds, 10-Yr & 30-Yr TIPS, and NOTHING ELSE.
  • @msf & @yogibearbull- I would really appreciate an explanation of buying at auction vs just buying at any time from a broker like Schwab... thanks!
    Maybe @Old_Joe is asking something different, but I have the same or similar question, simply... do you make more, less or the same money buying at auction versus buying secondary? Or, as I suspect, is there is no difference in the buyers return?

    Maybe I'm just not comprehending what you guys are stating and see as obvious. Quite likely :). But, I am not seeing it stated (or I'm missing) in your posts that there is any % return difference when buying the same CUSIP # before, at, or after auction. Is this correct?

  • @msf & @yogibearbull- OK guys- thanks much for your help and info. You two really help hold this place together.
  • edited August 2023
    3-mo T-Bill rate $IRX trades daily; note that scale is 10x yield.

    One can look at trading on Fridays and Tuesdays, the day-before and day-after the Monday Auction (except when Monday is a holiday). Just a quick look at the chart shows that rates are generally higher (prices lower) the day-after the Auction, but they are more random the day-before the Auction. Of course, the Treasury market is also affected by news and Friday-Monday gap may be an eternity, but not so for the Monday-Tuesday gap.

    Unless one is playing with large $amounts, the profits to be realized by this sort of trading may be tiny. You will also be competing with Treasury dealers (Primary or general). https://en.wikipedia.org/wiki/Primary_dealer

    https://stockcharts.com/h-sc/ui?s=$IRX&p=D&b=5&g=0&id=p75047699867
  • edited August 2023
    See video at Schwab how to buy at secondary(any time) and at auction (https://www.schwab.com/content/how-to-buy-treasuries)

    Finally, the differences are tiny when you think annually.
  • @FD1000- Thanks for that link. It's very clear and instructive, and showed me a couple of Schwab pages that I hadn't stumbled across before.
  • Thanks for the quick video FD. Since it didn't really mention any income or yield $ benefits for buying at auction versus secondary, I'm going with the assumption it doesn't matter which you buy, which I assumed all along.
  • @MikeM- Right! And I assumed all along that you were assuming the assumption that it doesn't matter which you buy, which you were assuming all along. So now I'm assuming that I was right on that too!:)
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