Negative 1 and 3 Month Treasury Rates

Discussion of the Cash portion of the Permanent Portfolio

Moderator: Global Moderator

User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

Re: Negative 1 and 3 Month Treasury Rates

Post by ochotona » Thu Mar 26, 2020 7:27 am

jalanlong wrote:
Wed Mar 25, 2020 8:52 pm
Tortoise wrote:
Wed Mar 25, 2020 8:28 pm
jalanlong wrote:
Wed Mar 25, 2020 7:29 pm
If Tbill rates stay negative I could just keep that 25% in cash in the brokerage account uninvested.
By “uninvested,” you mean invested in your brokerage account’s settlement fund, which I believe is generally some kind of money market fund. Might want to look under that hood.
I don’t believe so. I use M1 Finance as my broker. Any uninvested cash just sits in the account. I looked and it offers no interest. I don’t believe they sweep cash to any fund.
Yes but they don't pile up paper currency on your behalf. It's going to be in Money Market assets not Treasuries, not FDIC bank deposits, and they keep the interest... Like Schwab.
User avatar
jalanlong
Executive Member
Executive Member
Posts: 829
Joined: Mon Jul 01, 2019 7:30 am

Re: Negative 1 and 3 Month Treasury Rates

Post by jalanlong » Thu Mar 26, 2020 8:00 am

ochotona wrote:
Thu Mar 26, 2020 7:27 am
jalanlong wrote:
Wed Mar 25, 2020 8:52 pm
Tortoise wrote:
Wed Mar 25, 2020 8:28 pm
jalanlong wrote:
Wed Mar 25, 2020 7:29 pm
If Tbill rates stay negative I could just keep that 25% in cash in the brokerage account uninvested.
By “uninvested,” you mean invested in your brokerage account’s settlement fund, which I believe is generally some kind of money market fund. Might want to look under that hood.
I don’t believe so. I use M1 Finance as my broker. Any uninvested cash just sits in the account. I looked and it offers no interest. I don’t believe they sweep cash to any fund.
Yes but they don't pile up paper currency on your behalf. It's going to be in Money Market assets not Treasuries, not FDIC bank deposits, and they keep the interest... Like Schwab.
What do I care what they are doing with my uninvested funds? Of course they could fail, that is a risk. My thoughts are that if I put $100 in an ETF like Bill or GBIL, I may very likely end up with $99 at the end of the month or year with negative short term rates. But my $100 uninvested is still $100 assuming the brokerage doesn't fail and SIPC insurance cannot cover it.
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

Re: Negative 1 and 3 Month Treasury Rates

Post by ochotona » Thu Mar 26, 2020 8:31 am

MangoMan wrote:
Thu Mar 26, 2020 8:23 am
Do yourself a favor and buy a treasury only money fund with the idle cash. I had some cash at a broker in 2008 where the sweep fund was the Reserve Fund. The broker didn't fail, but Reserve did. It took months to get access to the money and I got something like 80 cents on the dollar with no interest.
Seconded. I got caught up in this debacle at Schwab in 2008. It was promoted as a safe, cash-like alternative. I even wrote checks off of it! Wow, did I feel brilliant. Until I got stabbed.

As you might have heard, the largest bond fund at Charles Schwab (Nasdaq: SCHW), YieldPlus, is plunging in price. Suffering from massive redemptions, of the vast majority of its assets, it was forced to sell illiquid mortgage-backed securities at distressed fire-sale prices. As a result, the fund cratered from $8.79 at the end of February to $7.17 at the end of March - a fall of more than 18% in one month - and is now trading at just $6.85. That's a really nasty year-to-date loss of 24% for an ultrashort bond fund which opened the year at $9.01 a share.
Libertarian666
Executive Member
Executive Member
Posts: 5994
Joined: Wed Dec 31, 1969 6:00 pm

Re: Negative 1 and 3 Month Treasury Rates

Post by Libertarian666 » Thu Mar 26, 2020 8:47 am

ochotona wrote:
Thu Mar 26, 2020 8:31 am
MangoMan wrote:
Thu Mar 26, 2020 8:23 am
Do yourself a favor and buy a treasury only money fund with the idle cash. I had some cash at a broker in 2008 where the sweep fund was the Reserve Fund. The broker didn't fail, but Reserve did. It took months to get access to the money and I got something like 80 cents on the dollar with no interest.
Seconded. I got caught up in this debacle at Schwab in 2008. It was promoted as a safe, cash-like alternative. I even wrote checks off of it! Wow, did I feel brilliant. Until I got stabbed.

As you might have heard, the largest bond fund at Charles Schwab (Nasdaq: SCHW), YieldPlus, is plunging in price. Suffering from massive redemptions, of the vast majority of its assets, it was forced to sell illiquid mortgage-backed securities at distressed fire-sale prices. As a result, the fund cratered from $8.79 at the end of February to $7.17 at the end of March - a fall of more than 18% in one month - and is now trading at just $6.85. That's a really nasty year-to-date loss of 24% for an ultrashort bond fund which opened the year at $9.01 a share.
I assume that is from 2008?
User avatar
jalanlong
Executive Member
Executive Member
Posts: 829
Joined: Mon Jul 01, 2019 7:30 am

Re: Negative 1 and 3 Month Treasury Rates

Post by jalanlong » Thu Mar 26, 2020 8:49 am

ochotona wrote:
Thu Mar 26, 2020 8:31 am
MangoMan wrote:
Thu Mar 26, 2020 8:23 am
Do yourself a favor and buy a treasury only money fund with the idle cash. I had some cash at a broker in 2008 where the sweep fund was the Reserve Fund. The broker didn't fail, but Reserve did. It took months to get access to the money and I got something like 80 cents on the dollar with no interest.
Seconded. I got caught up in this debacle at Schwab in 2008. It was promoted as a safe, cash-like alternative. I even wrote checks off of it! Wow, did I feel brilliant. Until I got stabbed.
So you think that the risk of a broker failing is worth losing money on negative interest rates? M1 does not have a MM fund so I would have to use a treasury ETF. Right now I am using GBIL which is a cheaper version of SHV.
Libertarian666
Executive Member
Executive Member
Posts: 5994
Joined: Wed Dec 31, 1969 6:00 pm

Re: Negative 1 and 3 Month Treasury Rates

Post by Libertarian666 » Thu Mar 26, 2020 8:50 am

jalanlong wrote:
Thu Mar 26, 2020 8:49 am
ochotona wrote:
Thu Mar 26, 2020 8:31 am
MangoMan wrote:
Thu Mar 26, 2020 8:23 am
Do yourself a favor and buy a treasury only money fund with the idle cash. I had some cash at a broker in 2008 where the sweep fund was the Reserve Fund. The broker didn't fail, but Reserve did. It took months to get access to the money and I got something like 80 cents on the dollar with no interest.
Seconded. I got caught up in this debacle at Schwab in 2008. It was promoted as a safe, cash-like alternative. I even wrote checks off of it! Wow, did I feel brilliant. Until I got stabbed.
So you think that the risk of a broker failing is worth losing money on negative interest rates? M1 does not have a MM fund so I would have to use a treasury ETF. Right now I am using GBIL which is a cheaper version of SHV.
How much money are we talking about? Hundreds, thousands, tens of thousands?
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

Re: Negative 1 and 3 Month Treasury Rates

Post by ochotona » Thu Mar 26, 2020 8:59 am

Jalanlong have you bought I-Bonds this year yet?

https://www.treasurydirect.gov/indiv/re ... ibonds.htm
User avatar
jhogue
Executive Member
Executive Member
Posts: 755
Joined: Wed Jun 28, 2017 10:47 am

Re: Negative 1 and 3 Month Treasury Rates

Post by jhogue » Thu Mar 26, 2020 10:51 am

Now would be a great time to start an I-bond ladder.

The yield on the I-bond will be 2.22% until 1 May 2020.

Get 'em while they are red-hot!
“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!"
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Negative 1 and 3 Month Treasury Rates

Post by mathjak107 » Sat Apr 04, 2020 4:45 am

MangoMan wrote:
Thu Mar 26, 2020 8:23 am
jalanlong wrote:
Thu Mar 26, 2020 8:00 am
ochotona wrote:
Thu Mar 26, 2020 7:27 am
jalanlong wrote:
Wed Mar 25, 2020 8:52 pm
Tortoise wrote:
Wed Mar 25, 2020 8:28 pm
jalanlong wrote:
Wed Mar 25, 2020 7:29 pm
If Tbill rates stay negative I could just keep that 25% in cash in the brokerage account uninvested.
By “uninvested,” you mean invested in your brokerage account’s settlement fund, which I believe is generally some kind of money market fund. Might want to look under that hood.
I don’t believe so. I use M1 Finance as my broker. Any uninvested cash just sits in the account. I looked and it offers no interest. I don’t believe they sweep cash to any fund.
Yes but they don't pile up paper currency on your behalf. It's going to be in Money Market assets not Treasuries, not FDIC bank deposits, and they keep the interest... Like Schwab.
What do I care what they are doing with my uninvested funds? Of course they could fail, that is a risk. My thoughts are that if I put $100 in an ETF like Bill or GBIL, I may very likely end up with $99 at the end of the month or year with negative short term rates. But my $100 uninvested is still $100 assuming the brokerage doesn't fail and SIPC insurance cannot cover it.
Do yourself a favor and buy a treasury only money fund with the idle cash. I had some cash at a broker in 2008 where the sweep fund was the Reserve Fund. The broker didn't fail, but Reserve did. It took months to get access to the money and I got something like 80 cents on the dollar with no interest.
i had reserve fund ..we lost 3% if i remember but it was locked for months. i luckily only had 35 bucks in it .
whatchamacallit
Executive Member
Executive Member
Posts: 750
Joined: Mon Oct 01, 2012 7:32 pm

Re: Negative 1 and 3 Month Treasury Rates

Post by whatchamacallit » Wed Mar 31, 2021 8:39 pm

1 month rate is begging to go negative again soon but this time without the initial virus fear.

https://www.treasury.gov/resource-cente ... data=yield

We started the year at .09. The last two weeks it has been bouncing between .02 and .01.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Negative 1 and 3 Month Treasury Rates

Post by mathjak107 » Fri Apr 02, 2021 5:56 am

Fund families are keeping the money markets positive by waiving expenses ....you may be better off in them then say something like bil
User avatar
jalanlong
Executive Member
Executive Member
Posts: 829
Joined: Mon Jul 01, 2019 7:30 am

Re: Negative 1 and 3 Month Treasury Rates

Post by jalanlong » Wed Apr 07, 2021 3:32 pm

mathjak107 wrote:
Fri Apr 02, 2021 5:56 am
Fund families are keeping the money markets positive by waiving expenses ....you may be better off in them then say something like bil
I noticed that my cash ETF GBILL hasn’t paid interest all year since the .09% expense ratio outweighs treasury bill returns at the moment. SHV hasn’t paid anything out this year either.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Negative 1 and 3 Month Treasury Rates

Post by mathjak107 » Wed Apr 07, 2021 3:49 pm

My fdlxx has been paying under a buck on 6 figures in cash .

But at least the fund families seem to be waiving the expenses while etfs are not
User avatar
jhogue
Executive Member
Executive Member
Posts: 755
Joined: Wed Jun 28, 2017 10:47 am

Re: Negative 1 and 3 Month Treasury Rates

Post by jhogue » Wed Apr 07, 2021 5:03 pm

The HBPP prescribes a Treasury money market fund for safety and liquidity, not yield. Chasing yield in cash is not necessary and can potentially lead to problems with safety and liquidity at the moment that you can least afford it.

BTW, the nominal yield of a 1 year Treasury zero stands at -0.01% today. Real yields of STTs have been negative for some time now. I note, in passing, that low Treasury yields have not stopped Warrant Buffet from piling up his stash of Treasurys estimated at more than $100 billion. He does not hold high-yield bonds, muni bonds, bank-sponsored repos, or currency swaps. Do you wonder why that is?
Last edited by jhogue on Wed Apr 07, 2021 5:04 pm, edited 1 time in total.
“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!"
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Negative 1 and 3 Month Treasury Rates

Post by mathjak107 » Wed Apr 07, 2021 5:04 pm

They both are treasuries only one is loosing money in the etf as no expenses seem to be waived
User avatar
I Shrugged
Executive Member
Executive Member
Posts: 2062
Joined: Tue Dec 18, 2012 6:35 pm

Re: Negative 1 and 3 Month Treasury Rates

Post by I Shrugged » Wed Apr 21, 2021 6:29 pm

jhogue wrote:
Wed Apr 07, 2021 5:03 pm
The HBPP prescribes a Treasury money market fund for safety and liquidity, not yield. Chasing yield in cash is not necessary and can potentially lead to problems with safety and liquidity at the moment that you can least afford it.

BTW, the nominal yield of a 1 year Treasury zero stands at -0.01% today. Real yields of STTs have been negative for some time now. I note, in passing, that low Treasury yields have not stopped Warrant Buffet from piling up his stash of Treasurys estimated at more than $100 billion. He does not hold high-yield bonds, muni bonds, bank-sponsored repos, or currency swaps. Do you wonder why that is?
I do.
User avatar
jhogue
Executive Member
Executive Member
Posts: 755
Joined: Wed Jun 28, 2017 10:47 am

Re: Negative 1 and 3 Month Treasury Rates

Post by jhogue » Wed Apr 21, 2021 7:32 pm

I think it is quite simple: Buffett is more concerned with the return of his money than he is with the return on his money. In other words, safety and liquidity must come before yield.
“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!"
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Negative 1 and 3 Month Treasury Rates

Post by mathjak107 » Fri Apr 23, 2021 5:56 pm

jhogue wrote:
Wed Apr 21, 2021 7:32 pm
I think it is quite simple: Buffett is more concerned with the return of his money than he is with the return on his money. In other words, safety and liquidity must come before yield.
He made so many poor buys and subsequent sales you have to wonder if that is true...he has underperformed a simple S&P fund for 15 years which gas no individual company risk either
whatchamacallit
Executive Member
Executive Member
Posts: 750
Joined: Mon Oct 01, 2012 7:32 pm

Re: Negative 1 and 3 Month Treasury Rates

Post by whatchamacallit » Thu Apr 29, 2021 5:56 pm

https://www.treasury.gov/resource-cente ... data=yield



1, 2 and 3 month all .01 last two days. Closer and closer to 0.
Don
Executive Member
Executive Member
Posts: 286
Joined: Fri Apr 21, 2017 6:21 pm

Re: Negative 1 and 3 Month Treasury Rates

Post by Don » Thu Apr 29, 2021 11:50 pm

mathjak107 wrote:
Fri Apr 23, 2021 5:56 pm
jhogue wrote:
Wed Apr 21, 2021 7:32 pm
I think it is quite simple: Buffett is more concerned with the return of his money than he is with the return on his money. In other words, safety and liquidity must come before yield.
He made so many poor buys and subsequent sales you have to wonder if that is true...he has underperformed a simple S&P fund for 15 years which gas no individual company risk either
He's been doing well recently and overperforming
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Negative 1 and 3 Month Treasury Rates

Post by mathjak107 » Fri Apr 30, 2021 2:44 am

It only took him 15 years to get lucky again
whatchamacallit
Executive Member
Executive Member
Posts: 750
Joined: Mon Oct 01, 2012 7:32 pm

Re: Negative 1 and 3 Month Treasury Rates

Post by whatchamacallit » Fri May 21, 2021 10:53 am

Very slowly churning lower.

Appears 1 month did go negative for moment today.

https://www.marketwatch.com/investing/b ... trycode=bx
whatchamacallit
Executive Member
Executive Member
Posts: 750
Joined: Mon Oct 01, 2012 7:32 pm

Re: Negative 1 and 3 Month Treasury Rates

Post by whatchamacallit » Fri May 21, 2021 12:39 pm

1 month bill is staying negative and I bet it will close negative today.

I can't imagine a treasury money market fund won't start passing this along to fund holders now.

Do they have method in place to not break the buck?
User avatar
Tortoise
Executive Member
Executive Member
Posts: 2751
Joined: Sat Nov 06, 2010 2:35 am

Re: Negative 1 and 3 Month Treasury Rates

Post by Tortoise » Fri May 21, 2021 1:59 pm

Maybe they'll close the fund to new investors to limit the number of new T-bill purchases, hold the NAV at $1, and increase the fund's ER to offset the negative rate?
Post Reply