re: 4 week Tbills went off at 5.96% this week

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so that $5000 at the end of a year when it's put back into my account would have returned 5.96%?

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no, that rate is only locked in for the first four weeks. Not for the reinvestments.

also, another point of clarification is 5.96% was last weeks auction rate. I don't know if this week will go up or down, but you are not going to get 5.96% exactly.

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ah ok makes sense, so it will renew each week at whatever the auction rate is, could be higher, could be lower?

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not each week, no. your term is 4 weeks so whatever rate you get will be locked in for 4 weeks. in 4 weeks time when the 1st reinvestment takes place, whatever rate comes out of that auction will lock you in for the next 4 weeks, rinse and repeat 13 times.

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but whatever % it goes at when it buys, i still would have had to do the 13 weeks to get that full percentage for this first 4 week period?

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I'm not exactly sure what you are asking but regardless if you reinvest or not you are going to get $5,000 x whatever % the auction comes in at X (4/52)...roughly for the first 4 week bill.

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Where is this from?

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TreasuryDirect

You earn the interest on the withdrawal at the beginning, not on the repayment at the end.

So they will take $495 out of your account, and then in 4 weeks give you $500 back. (not accurate amounts, just an example)

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Which risk? The risk of actually not getting paid? nah

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No way there’s an actual default. Worst case you don’t get your money on the due date. Even then it’s pretty likely the treasury will still pay you interest on the locked up funds.

I think large companies, funds, etc that have heaps running on short term notes just can’t afford to not have liquidity guaranteed on the maturity date. So they park money elsewhere. This gives people who don’t need 100% guaranteed liquidity on the maturity date and a little after better rates on the 4 month t bills.

I bought a good chunk of 4 weeks today. Missed out on the 6% previous auction .
Probably will buy a bunch in the secondary market before the supposed default date.

A bond genius I am not but this seems like an excellent buying opportunity.

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A bond genius I am not but this seems like an excellent buying opportunity.

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It’s like picking up pennies in front of bulldozers.

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How? What's the bulldozer going to be? 4 week UST notes not being paid? Please.

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A) it’s a line from When Genius Failed, the book about LTCM, that references incredibly small but very easy to make gains, unless you get his by the steamroller - (I said bulldozer but the quote is steamroller I believe). The bulldozer is all relative.

B) The extra yield on a 4 week instrument is immaterial without very large purchases. I personally am avoiding it for any clients because the potential headache of a couple days of missing liquidity isn’t worth the “pennies” you’re getting vs a 13-week bill. You’re taking about less that $6 per $10,000 extra over the course of the month.

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So what's the option you are offering clients?

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He said 13 week Tbills.

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set up an account yesterday on treasury direct

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Fyi, you can do this at Fidelity or any of the major brokerage including auto-roll. You only need a treasury direct account for I/EE bonds. Also buying on the brokerages, allows you to sell it before maturity if the need arises. Can't do that at treasury direct.

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A) it’s a line from When Genius Failed, the book about LTCM, that references incredibly small but very easy to make gains, unless you get his by the steamroller - (I said bulldozer but the quote is steamroller I believe). The bulldozer is all relative.

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It's a well-worn phrase in investing, a reference to people not understanding when they are short volatility. I fully understand.

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B) The extra yield on a 4 week instrument is immaterial without very large purchases. I personally am avoiding it for any clients because the potential headache of a couple days of missing liquidity isn’t worth the “pennies” you’re getting vs a 13-week bill. You’re taking about less that $6 per $10,000 extra over the course of the month

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It might be a pain in the arse, yes, but the adage you invoked captures a different sentiment.