Are free trades for treasuries really free? Except for TD Ameritrade?

Discussion of the Bond portion of the Permanent Portfolio

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BearBones
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Are free trades for treasuries really free? Except for TD Ameritrade?

Post by BearBones » Sat Jan 30, 2016 12:22 pm

Since I joined this forum, there has been increasing disillusionment with TLT and increasing enthusiasm for buying treasuries directly. The consensus here seems to be that, except for a small bid/ask spread, trading is essentially free for treasuries with most brokerages, making this a prudent decision for short and long term treasuries (vs parking money in a MF for ETF and having an ongoing management fee).

E.g., Jason's post from 2013:
http://gyroscopicinvesting.com/forum/bo ... ally-free/

HOWEVER, in 2013 I also asked about the tactic of TD Ameritrade:

"TD Ameritrade may act as principal on any fixed-income transaction. When acting as principal and receiving compensation on a net yield basis, we will add a markup to any purchase, and subtract a markdown from every sale. The markup or markdown will be included in the price and yield quoted to you."
https://www.tdameritrade.com/pricing.page#FixedIncome

Kevin stated that all brokerages do this. No free lunch. No one disagreed.
http://gyroscopicinvesting.com/forum/ot ... /#msg59262

And Barrett posted on a similar issue at TDA last year.
http://gyroscopicinvesting.com/forum/bo ... meritrade/

So my question is, is this fee unique to TDA? If so, and if treasury trades at Vanguard, Schwab and Fidelity are indeed free, I am switching brokerages for my retirement accounts!

Please respond if you know. Thanks.
Pet Hog
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Re: Are free trades for treasuries really free? Except for TD Ameritrade?

Post by Pet Hog » Sat Jan 30, 2016 1:56 pm

Two days ago I was in the process of posting a similar question about fees at Fidelity when I noticed this part in their commissions pdf:

https://www.fidelity.com/bin-public/060 ... hedule.pdf

[img width=500]http://i.imgur.com/wKCYuIj.jpg[/img]

So at Fidelity at least, all Treasury trades (including TIPS) are free at auction and free on the secondary market.  (Their web site is somewhat vague about whether non-auction purchases are free, but the pdf states it explicitly.)  I can confirm they are free at auction, having recently bought 1-, 2-, and 3-year treasuries from Fidelity. 
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Re: Are free trades for treasuries really free? Except for TD Ameritrade?

Post by BearBones » Sat Jan 30, 2016 2:16 pm

Thanks!

Here is what I see at Schwab:
0 commission for online trades, BUT...

"Schwab reserves the right to act as principal on any fixed income transaction, public offering, or securities transaction. When Schwab acts as agent, a commission is charged on the transaction. When Schwab acts as principal, the markup is included in the bond price."

So fee is buried in the price? Just like TDA?
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BearBones
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Re: Are free trades for treasuries really free? Except for TD Ameritrade?

Post by BearBones » Sat Jan 30, 2016 2:40 pm

Ok more to affirm the negative at Schwab from Boglehead forum. Sounding like it may be Vanguard, Fidelity, and ETrade for buying and selling treasuries.

https://www.bogleheads.org/forum/viewtopic.php?t=156154
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Re: Are free trades for treasuries really free? Except for TD Ameritrade?

Post by Pointedstick » Sat Jan 30, 2016 2:43 pm

Another downside of individual treasuries with Schwab is that you can't sell them without a broker, which is like $80 per transaction. Just Say No.™
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Re: Are free trades for treasuries really free? Except for TD Ameritrade?

Post by Lonestar » Sun Jan 31, 2016 7:58 am

Pet Hog wrote: Two days ago I was in the process of posting a similar question about fees at Fidelity when I noticed this part in their commissions pdf:

https://www.fidelity.com/bin-public/060 ... hedule.pdf

[img width=500]http://i.imgur.com/wKCYuIj.jpg[/img]


I can confirm they are free on secondary market trades as long as you do it online (without help from representative).  The only thing I have wondered about is the actual bid/ask prices.  I've never checked out other brokerages comparing these prices on a specific offering.

So at Fidelity at least, all Treasury trades (including TIPS) are free at auction and free on the secondary market.  (Their web site is somewhat vague about whether non-auction purchases are free, but the pdf states it explicitly.)  I can confirm they are free at auction, having recently bought 1-, 2-, and 3-year treasuries from Fidelity.
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Re: Are free trades for treasuries really free? Except for TD Ameritrade?

Post by BearBones » Sun Jan 31, 2016 12:32 pm

I skimmed thru the PP Book and didn't find anything about this.

Conclusion:  Based on absence of evidence otherwise in this post and elsewhere, seems that Fidelity, Vanguard and, perhaps, ETrade are the major brokerages of choice for owning treasuries direct.

I am going to switch brokerages so I can finally ditch TLT.
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Re: Are free trades for treasuries really free? Except for TD Ameritrade?

Post by escafandro » Sun Jan 31, 2016 11:21 pm

So if I understand well what the person at Bogleheads forum did was move his account from Schwab to Vanguard and there he can sell their treasury bonds at no cost?
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Re: Are free trades for treasuries really free? Except for TD Ameritrade?

Post by BearBones » Mon Feb 01, 2016 7:02 am

escafandro wrote: So if I understand well what the person at Bogleheads forum did was move his account from Schwab to Vanguard and there he can sell their treasury bonds at no cost?
Yes, seems that way (except for small bid/ask spread). The OP and one respondent affirmed that you have to call and pay fee to sell at schwab. This is affirmed by PS above and I have seen this posted before on this forum.
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Re: Are free trades for treasuries really free? Except for TD Ameritrade?

Post by dragoncar » Mon Feb 01, 2016 3:55 pm

BearBones wrote:
escafandro wrote: So if I understand well what the person at Bogleheads forum did was move his account from Schwab to Vanguard and there he can sell their treasury bonds at no cost?
Yes, seems that way (except for small bid/ask spread). The OP and one respondent affirmed that you have to call and pay fee to sell at schwab. This is affirmed by PS above and I have seen this posted before on this forum.
Crap, I thought I was finally off the hook when my employer moved my 401k from tdameritrade.  What did they switch it to?  Schwab.

Ps Schwab has charged me random small fees variously labeled "other fee" or "investment fee" and the like.  They have different labels but are very terse.  I asked a rep what they were and the first one said "look at the investment agreement."  I asked what page since it clearly said nothing about these fees, only fund expenses.  The next rep said they are "plan fees."  Is there any requirement that they actually document what these random fees are for or can they just make up any amount and change me?
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