Treasuries over CDs

[salt cured]

I have $100k I'd like to park for 1 to 2 years and was leaning toward a CD but see that 1-year T-bills have (had) better rates. My understanding of the buying process for T-bills (via treasury direct) is that the rate isn't actually set until after the auction concludes and you're locked in. I don't love this uncertainty but it seems like a better rate vs a CD is likely for the upcoming 1-year auction. As a total treasury notice, any cautions or resources to read before I jump in?

[mistymoney]

not only the rate - but the cost.

You buy in at par, but I'm seeing prices of 97-102, per 100 par, depending on what security you are buying.

[blue_green_sparks]

I have $100k I'd like to park for 1 to 2 years and was leaning toward a CD but see that 1-year T-bills have (had) better rates. My understanding of the buying process for T-bills (via treasury direct) is that the rate isn't actually set until after the auction concludes and you're locked in. I don't love this uncertainty but it seems like a better rate vs a CD is likely for the upcoming 1-year auction. As a total treasury notice, any cautions or resources to read before I jump in?

I had some cash hanging around so last week I bought a 3.05 %, 1-yr, brokered CD on Fidelity about 3 days before the open date. I noticed it was 'sold out' the next day. I also bid on a 6-month new issue T-bill with a limit price that yielded 2.89%, and after a few days the order came through and the bill starts earning tomorrow. I don't sweat a few tenths here and there because the cash was only earning 1.5%.

[DeniseNJ]

How about I bonds. There are lots of threads re them.   You can only do 10K per ssn per year, but that can be a good chunk if you have a spouse and kids.

[salt cured]

not only the rate - but the cost.

You buy in at par, but I'm seeing prices of 97-102, per 100 par, depending on what security you are buying.

Is the rate not reflected in the cost? For a non-competitive bid, I thought you pay less than face value and then redeem the full amount at maturity with difference being the rate.

[mistymoney]

not only the rate - but the cost.

You buy in at par, but I'm seeing prices of 97-102, per 100 par, depending on what security you are buying.

Is the rate not reflected in the cost? For a non-competitive bid, I thought you pay less than face value and then redeem the full amount at maturity with difference being the rate.

hmm, I don't think so. One result I'm looking at has a 2.75% interest rate, but purchase price is 99.49, so that doesn't work out. There is a field listed in the auction results about high yeild which is a bit higher than the interest rate - so maybe that combines them? but it doesn seem to add up to me there either.

[mistymoney]

not only the rate - but the cost.

You buy in at par, but I'm seeing prices of 97-102, per 100 par, depending on what security you are buying.

Is the rate not reflected in the cost? For a non-competitive bid, I thought you pay less than face value and then redeem the full amount at maturity with difference being the rate.

I think that is for EE bonds mayme? I was talking notes, bonds, and bills, so maybe that is the difference?

EE aren't subject to auction afaik, just has a purchase price.

[salt cured]

not only the rate - but the cost.

You buy in at par, but I'm seeing prices of 97-102, per 100 par, depending on what security you are buying.

Is the rate not reflected in the cost? For a non-competitive bid, I thought you pay less than face value and then redeem the full amount at maturity with difference being the rate.

I think that is for EE bonds mayme? I was talking notes, bonds, and bills, so maybe that is the difference?

EE aren't subject to auction afaik, just has a purchase price.

I am talking notes, bonds, and bills too, but you're right that reported investment rates and prices don't square, so maybe there are interest payments too. I think I'll buy $50k at the 52-week auction to dip my toe in and then maybe throw the other $50k into 26-week bills at some later point.

[mistymoney]

that is a pretty big toe!

Good luck!

[TomTX]

Seriously, put the annual max ($10k) into I-bonds today. Yield for the first 6 months is 9.62% and with current inflation I don't see that likely to drop for the following 6 months (the rate for the following 6 months is set November 1st). 

Even if the yield in the second 6 months is literally zero, you will have a better return than CDs or auctioned treasures. Note that you cannot cash out an I-bond for 12 months, and if you cash it out in the first 5 years you lose the last 3 months of interest.

EE bonds are ridiculously bad today.

[salt cured]

I maxed I-bonds on Jan 1 and still have 25% of my nw in cash. I will get that down to 20% but only want to keep half readily available, so I’m looking to beat a HYSA with the other 10%. 

[salt cured]

not only the rate - but the cost.

You buy in at par, but I'm seeing prices of 97-102, per 100 par, depending on what security you are buying.

Is the rate not reflected in the cost? For a non-competitive bid, I thought you pay less than face value and then redeem the full amount at maturity with difference being the rate.

hmm, I don't think so. One result I'm looking at has a 2.75% interest rate, but purchase price is 99.49, so that doesn't work out. There is a field listed in the auction results about high yeild which is a bit higher than the interest rate - so maybe that combines them? but it doesn seem to add up to me there either.

So the discounted rate does capture the full investment rate (see here: https://www.treasurydirect.gov/indiv/research/indepth/tbills/res_tbill.htm).

I started with a $25,000 26-week T-Bill that ended up with a 3.13% investment rate. They pulled $24,615 and change from my account today and will return $25,000 in 6 months. The ~$385 they left in my account is my interest.