Treasury Bond Buying Tutorial

Discussion of the Bond portion of the Permanent Portfolio

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moda0306
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Re: Treasury Bond Buying Tutorial

Post by moda0306 » Wed May 23, 2012 1:29 pm

I use "scheme" around people I know won't use it against me.  People here hate taxes enough that it earns me more respect than scorn.
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Re: Treasury Bond Buying Tutorial

Post by Greg » Wed May 23, 2012 2:31 pm

Gotcha. Yay respect.

On the non-tangent of this particular thread, I'll probably be purchasing 30 year bonds in a taxable account sometime this week. I won't have my Roth IRA until July and when I get it I'll just add more 30 year bonds into there as well up to the maximum.
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Re: Treasury Bond Buying Tutorial

Post by moda0306 » Wed May 23, 2012 2:34 pm

Since rates are only at 2.8%, I'll hesitate from my usual lecture about not placing LTT's in a taxable account if you can avoid it :).
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Re: Treasury Bond Buying Tutorial

Post by Greg » Wed May 23, 2012 2:41 pm

Indeed. I'm still very new to the PP process. I initially started off in active mutual funds (YAFFX) a little less than a year ago. And I have gotten "smarter" since. I then purchased PRPFX soon after YAFFX which slowly took me on the long road towards PP and all of you people.

All of my stuff currently is in taxable accounts and since I can only put in $5000 a year into a Roth IRA (plus the money I'll be able to put into my Roth TSP starting in July), I will still have a bulk of my money initially in taxable accounts. Over time, I'm hoping that I can have this start sliding the other way.
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Re: Treasury Bond Buying Tutorial

Post by dualstow » Wed May 23, 2012 5:28 pm

hoost wrote: Vanguard also let's you buy fewer than 10.  I think the price goes up slightly though.  I'm not sure how their prices/internal markups are relative to Fidelity, I bought six bonds a couple months ago with no issues.
Sorry, I meant to say *at auction*, where Vanguard shows a minimum of ten. Fidelity lets me pick whatever number I want, so far.
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Re: Treasury Bond Buying Tutorial

Post by hoost » Wed May 23, 2012 6:01 pm

dualstow wrote:
hoost wrote: Vanguard also let's you buy fewer than 10.  I think the price goes up slightly though.  I'm not sure how their prices/internal markups are relative to Fidelity, I bought six bonds a couple months ago with no issues.
Sorry, I meant to say *at auction*, where Vanguard shows a minimum of ten. Fidelity lets me pick whatever number I want, so far.
Ah, I haven't tried to buy any at auction, so I'll take your word for it.
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Re: Treasury Bond Buying Tutorial

Post by dualstow » Thu May 24, 2012 7:34 am

hoost wrote:
dualstow wrote:
hoost wrote: Vanguard also let's you buy fewer than 10.  I think the price goes up slightly though.  I'm not sure how their prices/internal markups are relative to Fidelity, I bought six bonds a couple months ago with no issues.
Sorry, I meant to say *at auction*, where Vanguard shows a minimum of ten. Fidelity lets me pick whatever number I want, so far.
Ah, I haven't tried to buy any at auction, so I'll take your word for it.
I think I read somewhere on this forum that you get a tiny discount if you buy at auction, but I don't know if it's even true. But, the offerings come frequently enough- more frequently than any new cash coming in,  ;) so I tend to use the auctions.
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Re: Treasury Bond Buying Tutorial

Post by Greg » Thu May 24, 2012 9:55 am

Are you speaking about purchasing the treasuries at auction from a broker or from TreasuryDirect? From a broker if that meant a discount then that would be good knowledge to have. If from TreasuryDirect, I remember reading about some sort of fee to have them transfer your bond to a brokerage account so you can sell it. If it's only a form however that's not as bad, just a hassle.
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Re: Treasury Bond Buying Tutorial

Post by dualstow » Thu May 24, 2012 2:42 pm

1NV3ST0R wrote: Are you speaking about purchasing the treasuries at auction from a broker or from TreasuryDirect?
From a broker: specifically Fidelity. Treasuries are traded there with no fee whatsoever, so the "discount" has nothing to do with fees. I'll try to find the thread and post tomorrow.
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Re: Treasury Bond Buying Tutorial

Post by embitca » Fri Aug 10, 2012 8:16 pm

Gumby wrote: For those interested in owning your own Treasury bonds directly*, I've put together a series of 5 screenshots to show you how easy it is to buy Treasury Bonds at Fidelity. I
This is so very helpful to me. I've never been able to make heads or tails of these screens until now. Thank you!
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Re: Treasury Bond Buying Tutorial

Post by Kriegsspiel » Thu Sep 20, 2012 1:33 pm

The second Harry Browne radio link in the FAQ really helped me understand the whole "buying your own LTTs," but I just wanted to make sure I had my thoughts in order:

I'm using Vanguard.

1.  So, the yields aren't really important, because it'll even out in that you'll pay more for a higher yielding bond with the same maturity date than you would for one with a lower yield, so at maturity, you'd have the same amount of money?

2.  You can only buy long term treasuries in batches of $1000?  So if the "min quantity bid" was 1, at a price of 95.824, you would be paying $958.24 for that bond?

3.  Then, once you have the bonds, they show up in your brokerage account (mine is in my Roth) like stocks would.  And you can either sell them if you need to rebalance because interest rates dropped and maybe that one you bought at 95.824 is now worth 99.000 or whatever.  OR, you sell them after they've matured 10 years.  So if you bought a bond with 29 years left, you sell it 9 years later, if you've never had to rebalance and sell it prior to that?
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Re: Treasury Bond Buying Tutorial

Post by Gumby » Thu Sep 20, 2012 11:22 pm

Kriegsspiel wrote:1.  So, the yields aren't really important, because it'll even out in that you'll pay more for a higher yielding bond with the same maturity date than you would for one with a lower yield, so at maturity, you'd have the same amount of money?
Yes, in a matter of speaking. Though, you won't see different coupon rates for the exact same maturity date. You might see different coupon rates for Treasuries with slightly different maturity dates and in that case it shouldn't matter which one you purchase (tax considerations aside) since the pricing takes the differences into account. Basically, when buying 30-year bonds, you're looking for a long duration, not coupon.
Kriegsspiel wrote:2.  You can only buy long term treasuries in batches of $1000?  So if the "min quantity bid" was 1, at a price of 95.824, you would be paying $958.24 for that bond?
It seems like you're only buying 1 single $1000 bond, but in reality you're buying a basket of 10 bonds, because the Treasury officially issues 30-year bonds in $100 increments. It's confusing, I know. Call your brokerage if you have questions on this.
Kriegsspiel wrote:3.  Then, once you have the bonds, they show up in your brokerage account (mine is in my Roth) like stocks would.  And you can either sell them if you need to rebalance because interest rates dropped and maybe that one you bought at 95.824 is now worth 99.000 or whatever.  OR, you sell them after they've matured 10 years.  So if you bought a bond with 29 years left, you sell it 9 years later, if you've never had to rebalance and sell it prior to that?
Right.
Last edited by Gumby on Thu Sep 20, 2012 11:51 pm, edited 1 time in total.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
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