Treasury Bond Buying Tutorial

Discussion of the Bond portion of the Permanent Portfolio

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Re: Treasury Bond Buying Tutorial

Post by sophie » Tue Jul 03, 2018 7:52 am

Selling Treasuries can be a bit complicated and it depends on where you're holding them.

Treasury Direct: you can't sell them on the site. You have to transfer them to a brokerage account and then sell. I've never tried to do this as I only use this account for savings bonds.

Fidelity: Very easy! Expand the bond in the "positions" view and hit the "sell" button. There is no fee to buy or sell, but be aware that there is a bid-ask spread, so there is a cost involved. If you own, say, 10 $1000 bonds and want to sell 5 of them, take care to enter "50" in the sell amount as bonds values are calculated in $100 lots.

Other brokerages (Vanguard, Schwab) charge a fee to sell a bond. Especially beware of Ally Bank's TradeKing investment account, where the fees can be as high as $50 a bond (not the advertised $1) and apply to buying and selling.

Some brokers (Ally Bank's TradeKing) do not allow you to sell a bond online, only by phone. Vanguard and Schwab used to, but both now allow you to sell bonds through the website (per their website; I haven't tried it).
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Re: Treasury Bond Buying Tutorial

Post by HappyMan » Tue Jul 03, 2018 9:56 am

Thank you. Forgot to mention that I am with Schwab. Will check their fees.
sophie wrote:
Tue Jul 03, 2018 7:52 am
Selling Treasuries can be a bit complicated and it depends on where you're holding them.

Treasury Direct: you can't sell them on the site. You have to transfer them to a brokerage account and then sell. I've never tried to do this as I only use this account for savings bonds.

Fidelity: Very easy! Expand the bond in the "positions" view and hit the "sell" button. There is no fee to buy or sell, but be aware that there is a bid-ask spread, so there is a cost involved. If you own, say, 10 $1000 bonds and want to sell 5 of them, take care to enter "50" in the sell amount as bonds values are calculated in $100 lots.

Other brokerages (Vanguard, Schwab) charge a fee to sell a bond. Especially beware of Ally Bank's TradeKing investment account, where the fees can be as high as $50 a bond (not the advertised $1) and apply to buying and selling.

Some brokers (Ally Bank's TradeKing) do not allow you to sell a bond online, only by phone. Vanguard and Schwab used to, but both now allow you to sell bonds through the website (per their website; I haven't tried it).
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Re: Treasury Bond Buying Tutorial

Post by vnatale » Tue Mar 24, 2020 7:24 pm

Gumby wrote:
Tue Nov 01, 2011 11:39 pm
6 Iron wrote: I sold about 80% of my TLT today at the market open, and I have an internal conflict. With the bulk of my long bonds liquidated, I feel as if my left flank is uncovered as I have the three business days before I can buy bonds. On the other hand, and I realize that I am violating the code here, but, I am extraordinarily tempted to market time or dollar cost average my move back in.

What would you do?
When you covert your TLT to cash, you've effectively turned 50% of your portfolio into cash. So, a portfolio consisting of (roughly) 50% cash, 25% stocks and 25% gold probably isn't going to be all that different from a traditional 4x25 PP over the span of three days. That's because you've basically turned your portfolio into a version of PRPFX (which can't own very many Long Term Bonds). Actually, your portfolio will most closely resemble Clive's "Rate Tart" PP — which held up very well through 2008-2009. The only difference between the "Rate Tart" PP and the 4x25 PP was that the 4x25 PP recovered more quickly in Dec 2008, when the LTTs kicked in big time.

http://gyroscopicinvesting.com/forum/ht ... 730#p12730
(Keep in mind that Clive's comments are deleted from the "Rate Tart" PP discussion)

So, you can probably relax more than you think. But, my recommendation is still to buy your bonds sooner rather than later, since we may be experiencing some high volatility in the next few weeks as Greece appears to move closer and closer to its eventual default. Do what feels right, but know that it probably won't make a tremendous difference either way.


Can anyone make a case for a period of time when no one could write: "since we may be experiencing.....[due to]..]?


Vinny
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Re: Treasury Bond Buying Tutorial

Post by vnatale » Tue Mar 24, 2020 8:48 pm

moda0306 wrote:
Wed Mar 28, 2012 10:56 am
If anyone here has done a few Vanguard bond trades and would be willing to post a tutorial it would be MUCH appreciated by myself and others.
I read through all the posts here and I don't think anyone ever fulfilled his request.

Hopefully, before the week is over I will finally buy my first bonds ever - Treasury Bills with Vanguard. If I do do so, I'll probably just naturally document it which would enable this request to finally be fulfilled.

Vinny
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Re: Treasury Bond Buying Tutorial

Post by dualstow » Tue Mar 24, 2020 9:36 pm

I think you’re right, but things have changed since then anyway. Craig mentions Vanguard’s “Bond Desk” and I don’t think they even use the term anymore. You used to have to call to order bonds, hence the desk.

There’s some good info on page 8, beginning with Krieg’s post.

I would post a tutorial if i thought I could cover everything that a new buyer of bonds would like to do.
I only know how to do what I do, which doesn’t require a tutorial because it is so limited. (For example, I almost always use the auctions, not the secondary market).
I have always just clicked my way through it. It was easy.
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Re: Treasury Bond Buying Tutorial

Post by vnatale » Tue Mar 24, 2020 9:49 pm

dualstow wrote:
Tue Mar 24, 2020 9:36 pm
I think you’re right, but things have changed since then anyway. Craig mentions Vanguard’s “Bond Desk” and I don’t think they even use the term anymore. You used to have to call to order bonds, hence the desk.

There’s some good info on page 8, beginning with Krieg’s post.

I would post a tutorial if i thought I could cover everything that a new buyer of bonds would like to do.
I only know how to do what I do, which doesn’t require a tutorial because it is so limited. (For example, I almost always use the auctions, not the secondary market).
I have always just clicked my way through it. It was easy.
Using Vanguard?

Vinny
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Re: Treasury Bond Buying Tutorial

Post by dualstow » Wed Mar 25, 2020 6:58 am

Yep
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Re: Treasury Bond Buying Tutorial

Post by Kriegsspiel » Wed Mar 25, 2020 7:30 am

Vinny I just took some screenshots, since I'm not sure if you've tried it before... In your brokerage, click on Buy and Sell, then Trade Bonds or CDs
v1.png
v1.png (35.57 KiB) Viewed 20500 times
Now, here it looks like Vanguard has changed it, because the quick search here used to go out to 30 years, not just 10:
v2.png
v2.png (33.45 KiB) Viewed 20500 times
But you can just click on Treasuries from that top menu:
v3.png
v3.png (16.98 KiB) Viewed 20500 times
v5.png
v5.png (32.12 KiB) Viewed 20500 times
v4.png
v4.png (78.45 KiB) Viewed 20500 times
Click the buy button, then say how many you want, and buy them. You can buy and sell less than the "min qty" but you won't get the advertised price/yield.
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Re: Treasury Bond Buying Tutorial

Post by jhogue » Wed Mar 25, 2020 8:48 am

Vinny,

Given all of the difficulties that you have described in multiple threads on this forum dealing with Vanguard over the telephone, I wonder if you would not be more satisfied establishing your accounts in-person at your nearest Fidelity brick-and-mortar office.

-Fidelity's headquarters is in Boston, but their satellite office nearest you is in Shrewsbury, about 45 miles from Montague, MA, tel.1-800-521-3026. You could call ahead, get an appointment, and outline all the changes you want to make.

-My general impression is that Fidelity's bond operation is more extensive than Vanguard's.

-The local office would certainly help you transfer and consolidated your accounts at Fidelity, and while they don't offer tax advice as such, I have found their representatives well-informed about state and local tax situations. Last time I used my local Fidelity office, they helped me establish a new Roth conversion IRA to avoid tax complications down the road.


You should also realize that you are attempting to move into the bond market at a moment of truly unprecedented volatility. Massive swings up and down on a daily basis have caught all the major brokerage firms trying to catch up with severe dislocations caused by enormous volumes of transactions and unanticipated liquidity issues. Stuff happens.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Treasury Bond Buying Tutorial

Post by vnatale » Wed Mar 25, 2020 9:16 am

Kriegsspiel wrote:
Wed Mar 25, 2020 7:30 am
Vinny I just took some screenshots, since I'm not sure if you've tried it before... In your brokerage, click on Buy and Sell, then Trade Bonds or CDs

v1.png

Now, here it looks like Vanguard has changed it, because the quick search here used to go out to 30 years, not just 10:

v2.png

But you can just click on Treasuries from that top menu:

v3.png

v5.png
v4.png

Click the buy button, then say how many you want, and buy them. You can buy and sell less than the "min qty" but you won't get the advertised price/yield.
Thanks for all of this! Yesterday I got caught up with "working from home" from 9 AM until about 6:30 PM so I could not get into my Vanguard account to see what you have put here because the broker said you could only see pricing when the market is open.

Vinny
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Re: Treasury Bond Buying Tutorial

Post by Kriegsspiel » Wed Mar 25, 2020 9:22 am

vnatale wrote:
Wed Mar 25, 2020 9:16 am
Thanks for all of this! Yesterday I got caught up with "working from home" from 9 AM until about 6:30 PM so I could not get into my Vanguard account to see what you have put here because the broker said you could only see pricing when the market is open.

Vinny
No problem. Keep in mind you can also only trade Treasuries when the market is open.
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Re: Treasury Bond Buying Tutorial

Post by vnatale » Wed Mar 25, 2020 9:25 am

jhogue wrote:
Wed Mar 25, 2020 8:48 am
Vinny,

Given all of the difficulties that you have described in multiple threads on this forum dealing with Vanguard over the telephone, I wonder if you would not be more satisfied establishing your accounts in-person at your nearest Fidelity brick-and-mortar office.

-Fidelity's headquarters is in Boston, but their satellite office nearest you is in Shrewsbury, about 45 miles from Montague, MA, tel.1-800-521-3026. You could call ahead, get an appointment, and outline all the changes you want to make.

-My general impression is that Fidelity's bond operation is more extensive than Vanguard's.

-The local office would certainly help you transfer and consolidated your accounts at Fidelity, and while they don't offer tax advice as such, I have found their representatives well-informed about state and local tax situations. Last time I used my local Fidelity office, they helped me establish a new Roth conversion IRA to avoid tax complications down the road.


You should also realize that you are attempting to move into the bond market at a moment of truly unprecedented volatility. Massive swings up and down on a daily basis have caught all the major brokerage firms trying to catch up with severe dislocations caused by enormous volumes of transactions and unanticipated liquidity issues. Stuff happens.
Thanks for the above. I'm familiar with Shrewsbury as it is next door to where my first college is located (Worcester). However, rather than it being 45 minutes from me, it's at least 1 hour and 15 minutes, if not one hour and one-half from me. Boston would only be 15 minutes to half hour farther for me.

Part of the issue is that Vanguard's hours for business also seem to be the same times as my hours of "working from home". Once I can free up some "working from home" hours I can follow through with bond buying with Vanguard. And, initially, it is only strictly going to be buying Treasury Bills for cash in an attempt to mimic Treasury Bill money market fund. But one that IS 100% Treasury Bills.

I'd decided by last July 4, 2019 that I was going full Permanent Portfolio but other things kept getting in the way so that implementation never happened. I had plans for how I wanted to do the implementation. But I am, finally, making some baby steps towards implementation and am constantly learning new things via this forum and my interactions with Vanguard. But once I am fully implemented THE final step will be to then take 1/2 of what I have at Vanguard and put it with Fidelity.

Vinny
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Re: Treasury Bond Buying Tutorial

Post by vnatale » Fri Apr 24, 2020 5:07 pm

Gumby wrote:
Thu Nov 03, 2011 10:59 am
foglifter wrote: A couple of questions came to my mind after reading your post:

1. Market order vs. limit order: does it really matter which type of order to use?
It depends on what you want. If you know what price you want to pay for the bonds — and don't mind waiting for the market to hit that price — then use a limit order. If you just want the bonds now — and don't mind paying the market price — use a market order. With a market order, you are going to pay something close to the latest "Ask" price. However, with a limit order, you risk not getting the bonds at all if the market price rises from that point forward. I have also used market orders for Treasuries many times and never been disappointed. So, it really depends on what you want and how much you're willing to spend.

One easy way to decide is to look at the Bid/Ask spread. Since the Treasury market is very liquid, the Bid/Ask spread is almost always very tight. In other words, the bidder's price will almost always be extremely close to the asker's price. When you place a market order, you are basically saying that you're willing to take the "Ask" price, whatever it may be. With Treasuries, I don't think it really matters because of the liquidity and the spread is almost always going to be very tight.

Keep in mind that retail brokerages don't put you at the front of the line when limit trades happen. Most of these brokerage houses will usually only sell you something as a limit order if the price drops a few pennies below your bid price, because they will typically try to buy for a slight discount and then quickly sell it to you for the price you asked for. This is even true in full-service brokerage houses — and it's been a long-standing tradition on Wall Street. Remember, most people on Wall Street make most of their money through billions and billions of pennies that add up.

However, I would definitely recommend that you use a limit order when selling your bonds. That way you get the price that you want.
foglifter wrote:2. Is it better to use a ladder of bonds spreading the purchases in time or just sell all my EDV/TLT and buy bonds at once?
If you're unhappy with TLT, just sell it and buy 30 year Treasuries all at once. Your 20-30 year ladder will happen gradually over time as you rebalance into bonds over the years. The truth is that if taxes (and simplicity) weren't a factor you're PP might actually be better off rolling over 29 year Treasuries back into 30 year Treasuries each year. But, for the sake of our sanity, we just let a natural ladder happen on its own. There are some advantages to having a naturally occurring 20-30 year ladder in your pocket. For example, if you ever have a capital gain in another asset, like your Stocks, you might be able to sell a losing 23 year Treasury — take a capital loss, for tax loss harvesting — and roll it over to a new 30-year Treasury without any wash sale issues (since the durations are so different). Of course, that's just a futuristic hypothetical situation (since a seven-year-old 2034 Treasury should be doing pretty well right now).
foglifter wrote:3. What is the difference between buying at the auction or secondary market?
In terms of the actual bond, there is no difference whatsoever — since the bonds themselves are just electronic records in your account. Some brokerage houses will charge a fee to transact with the secondary market. But, at Fidelity, they are free either way. So, it makes no difference at Fidelity or Schwab. If you want the bonds immediately, just buy them on the secondary market.

If you happen to be just a day or two away from the regularly scheduled 30 year auction, you may want to participate in the auction just for fun. Just understand that you will be entering a "non-competitive" bid at the auction — which means that you are willing to pay the market price, for that bond, at the time of auction. If the auction isn't as highly over-subscribed as it usually is, you may get a nice little discount at the auction (maybe something like $999 per bond) — which is always fun. And the level of participation in the auction will typically affect the mood of the bond market. But, it's probably not worth waiting a week or two just to participate in the auction.

So, the secondary market is where all the trading action is. The auction is where the bonds are handed out to the public for trading and holding. After the auction is complete and the accounts are settled, most of those new bonds will be trading on the secondary market anyway — and that's why the Treasury market is so liquid.

Bottom line...if your brokerage house isn't going to charge you anything to participate in the secondary market, you'll have more control in the secondary market. And, of course, remember that you can only sell your bonds on the secondary market. The auction is really for those who want to have a little fun with it.

Absolutely PACKED with useful information!


Vinny
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Re: Treasury Bond Buying Tutorial

Post by Kriegsspiel » Thu Aug 26, 2021 1:26 pm

I recently found out something about selling individual bonds at Vanguard. When you go to sell bonds below the required amount, you have to click on the "show more" dropdown below the CUSIP and find the line with the amount of bonds you want to sell, and sell them on that line. You can't just click "sell" on the left thinking Vanguard will do that for you.

I believe this is why they failed to sell my bonds when I wanted to sell them at the top in 2020.
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Re: Treasury Bond Buying Tutorial

Post by dualstow » Thu Aug 26, 2021 1:40 pm

Kriegsspiel wrote:
Thu Aug 26, 2021 1:26 pm
I recently found out something about selling individual bonds at Vanguard. When you go to sell bonds below the required amount, you have to click on the "show more" dropdown below the CUSIP and find the line with the amount of bonds you want to sell, and sell them on that line. You can't just click "sell" on the left thinking Vanguard will do that for you.

I believe this is why they failed to sell my bonds when I wanted to sell them at the top in 2020.
Does it show a slightly worse price than what you would get if you met the minimum?
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Re: Treasury Bond Buying Tutorial

Post by Kriegsspiel » Thu Aug 26, 2021 2:33 pm

Yup.

I do want to mention, that a guy from Vanguard walked me through this on the phone, since if you try it the wrong way and Vanguard cancels your order, you can't go back and do it the right way. So I had to call like it was 1998 and talk to a human. It was actually kind of nice.
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Re: Treasury Bond Buying Tutorial

Post by vnatale » Sun Oct 17, 2021 9:27 am

Lone Wolf wrote:
Fri Oct 28, 2011 9:12 pm



Insurance may not be a bad way to spend some of your PP riches but it's not a requirement.  Storage in a safe deposit box at your local bank is cheap, often around $30-$50 per year.  If you hold even 20 ounces of gold in a $30 safe deposit box, that works out to less than 0.08% per year.


STILL doing my research and wanting as many questions answered prior to implementing...

I received these quotes from my bank...

"Extra small 3”x5”24” (3” high, 5” wide and 24” long) with an annual box rental fee of $30

Small 3”x10”24” (3” high, 10” wide and 24” long) with an annual box rental fee of $60"

How many ounces of gold would I be able to put in each of the two boxes? I assume twice as many in the second as the first?
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Re: Treasury Bond Buying Tutorial

Post by Mark Leavy » Sun Oct 17, 2021 11:20 am

vnatale wrote:
Sun Oct 17, 2021 9:27 am

STILL doing my research and wanting as many questions answered prior to implementing...

I received these quotes from my bank...

"Extra small 3”x5”24” (3” high, 5” wide and 24” long) with an annual box rental fee of $30

Small 3”x10”24” (3” high, 10” wide and 24” long) with an annual box rental fee of $60"

How many ounces of gold would I be able to put in each of the two boxes? I assume twice as many in the second as the first?
300 ounces fits easily in the extra small box.
You will need to start eating meat before you can fill the larger box and lift it over your head.

Which is about as likely as you ever actually implementing a Permanent Portfolio.
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Re: Treasury Bond Buying Tutorial

Post by vnatale » Sun Oct 17, 2021 12:10 pm

Mark Leavy wrote:
Sun Oct 17, 2021 11:20 am

vnatale wrote:
Sun Oct 17, 2021 9:27 am


STILL doing my research and wanting as many questions answered prior to implementing...

I received these quotes from my bank...

"Extra small 3”x5”24” (3” high, 5” wide and 24” long) with an annual box rental fee of $30

Small 3”x10”24” (3” high, 10” wide and 24” long) with an annual box rental fee of $60"

How many ounces of gold would I be able to put in each of the two boxes? I assume twice as many in the second as the first?


300 ounces fits easily in the extra small box.
You will need to start eating meat before you can fill the larger box and lift it over your head.

Which is about as likely as you ever actually implementing a Permanent Portfolio.


Thanks. I now seem to have estimated ranges of 300 to 500 coins fitting in the small. Calculating the weight of 400 came out to 25 pounds.

By the way even at my age (70) and weight (145 lb) I am able to dead lift 190 lb and press 75 lbs over my head. So seems I could lift that larger box of 37.5 lbs (using your 300 amount) over my head. I do use 35 pound plates for some of my barbell exercises.
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Re: Treasury Bond Buying Tutorial

Post by vnatale » Sun Oct 17, 2021 5:54 pm

dualstow wrote:
Tue Mar 24, 2020 9:36 pm

I think you’re right, but things have changed since then anyway. Craig mentions Vanguard’s “Bond Desk” and I don’t think they even use the term anymore. You used to have to call to order bonds, hence the desk.

There’s some good info on page 8, beginning with Krieg’s post.

I would post a tutorial if i thought I could cover everything that a new buyer of bonds would like to do.
I only know how to do what I do, which doesn’t require a tutorial because it is so limited. (For example, I almost always use the auctions, not the secondary market).
I have always just clicked my way through it. It was easy.


Why is that the case for you?

Today I read in my forum notes (from probably somewhere in this topic) someone making the case the of where buying on the secondary market was more advantageous than at auction.
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Re: Treasury Bond Buying Tutorial

Post by vnatale » Sun Oct 17, 2021 6:19 pm

Kriegsspiel wrote:
Wed Mar 25, 2020 7:30 am

Vinny I just took some screenshots, since I'm not sure if you've tried it before... In your brokerage, click on Buy and Sell, then Trade Bonds or CDs

v1.png

Now, here it looks like Vanguard has changed it, because the quick search here used to go out to 30 years, not just 10:

v2.png

But you can just click on Treasuries from that top menu:

v3.png

v5.png
v4.png

Click the buy button, then say how many you want, and buy them. You can buy and sell less than the "min qty" but you won't get the advertised price/yield.


Many thanks for this. I finally reached a point in my process wherein I could review this in detail. I have some questions on your final comments. I attempted to answer them on my own but after I just logged into my Vanguard account it would not let me go beyond a certain point due to the markets not currently being open.

My questions are in regards to the first two columns - "Qty." and "Min qyt." I assume the that the first one is in $$? $5,000? But I cannot tell what the "250's" represent. Not $250? Not 250 bonds, as that would be $250,000 worth (if $1,000 each or $1,250,000 if in blocks of $5,000). But maybe they are. Not at all clear to me.

If you don't get the advertised price / yield for not buying or selling the minimum what do you get? How close is it to the advertised?
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Re: Treasury Bond Buying Tutorial

Post by dualstow » Mon Oct 18, 2021 5:45 am

vnatale wrote:
Sun Oct 17, 2021 5:54 pm
dualstow wrote:
Tue Mar 24, 2020 9:36 pm
I think you’re right, but things have changed since then anyway. Craig mentions Vanguard’s “Bond Desk” and I don’t think they even use the term anymore. You used to have to call to order bonds, hence the desk.

There’s some good info on page 8, beginning with Krieg’s post.

I would post a tutorial if i thought I could cover everything that a new buyer of bonds would like to do.
I only know how to do what I do, which doesn’t require a tutorial because it is so limited. (For example, I almost always use the auctions, not the secondary market).
I have always just clicked my way through it. It was easy.
Why is that the case for you?

Today I read in my forum notes (from probably somewhere in this topic) someone making the case the of where buying on the secondary market was more advantageous than at auction.
Once when this came up, somebody wrote that some people just like that new bond smell. O0 I think that’s as good a reason as any. I’ve heard the opposite of what you’ve heard, i.e. that the auction gives a slight advantage, but that’s not why I used the auction.

(Meanwhile, outside, the pp, I used the secondary market for ten-year notes. I used the auction for notes with a 2031 maturity, but later I kept sporadically collecting more on the secondary market. I just kept seaching for the CUSIP of what I already owned, or clicking BUY next to that holding in Vanguard’s Balances and Holdings view).
Sam Bankman-Fried sentenced to 25 years
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