Fidelity Bond and Bill Direct Purchase ?'s

Discussion of the Bond portion of the Permanent Portfolio

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pmward
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Fidelity Bond and Bill Direct Purchase ?'s

Post by pmward » Tue Feb 05, 2019 12:13 pm

Hey guys, I'm in the process of setting up my GB over the next week. I was perusing Fidelity's site for direct bond purchases and I came up with a couple questions that I couldn't find the answer to on the site:

1) I see there is a 30 year bond offering with a settlement date on the 15th. Expected yield is decently higher than TLT. So I'm thinking of doing my big rebalance and putting my full initial LTT allocation in this. One question I have is once I purchase the bonds, does the account screen reflect the day to day price fluctuations like they do a stock? Or do I have to manually look up the sale price and calculate?

2) I see Fidelity has an auto-renew feature now. Has anyone ever set up a ladder of T-Bills for the cash portion? Currently I'm using SHV as my money market account, but yields on the T-Bills are much better when there's no ER involved. Is it really as hassle free to auto-renew T-Bills as it appears? Also, what happens if I have an emergency and need to sell, are selling T-Bills as liquid as selling an ETF?

I like the idea of having the bonds in my own possession as opposed to in a fund. It also eliminates a lot of fees. Just curious if there is any hassle involved, or if this is as good as it appears on first glance?
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by flyingpylon » Tue Feb 05, 2019 12:50 pm

Based on my experience, it's as good as it sounds.

1 - Prices do reflect fluctuations.

2 - Auto-renew is easy and hassle-free (though it's been a couple years since I was doing this). I recently sold some T-bills at Fidelity. It took one day for the transaction to settle and one more day to EFT to my checking account at another bank. Of course your mileage may vary and I would build at least a few extra days into the plan if possible.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by pmward » Tue Feb 05, 2019 1:03 pm

Excellent! Well that seems like a pretty good deal then, and not anymore hassle than an ETF. I just wanted to make sure that this was as good as it sounds, and that there isn't any hidden gotchas. I think I'm gonna give it a go! It's kind of fun trying out new things like this. I've never actually purchased a bond directly before.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by anato » Tue Feb 05, 2019 3:38 pm

Only issue I found with the auto-roll is that there's no way on the website to turn it off if you change your mind and you don't want them to buy it again when it matures. But this is realistically an issue only for STT, not LTT, since after a 30y bond has 20y left, you're supposed to sell it and buy another 30y.

For 30y, I personally prefer to spread my contributions in no more than 2-3k$ each when they go on action, so I feel I have more flexibility when it comes to tax loss harvesting. I guess it's purely psychological... since I think you could sell any an integral portion of each bond holding (i.e. if you bought 15, you can sell 3 and keep 12)
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by Pet Hog » Tue Feb 05, 2019 4:12 pm

Regarding question 1, the bond price on Fidelity is updated just once per day, at around 8 pm eastern. You don't get the real-time prices during the day as you do for stocks.

As anato noted, the auto-roll feature can't be turned off on the website, but you can make a call and they'll do it for you. It's very easy -- I did it about three months ago.

Buying bonds direct is, to me, quite thrilling. It does seem to give extra peace of mind, cutting out one middleman, and it feels like you're playing with the grownups! Just make sure you express your interest in the auction before the 15th so you don't miss it.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by pmward » Tue Feb 05, 2019 4:36 pm

Pet Hog wrote:
Tue Feb 05, 2019 4:12 pm
Regarding question 1, the bond price on Fidelity is updated just once per day, at around 8 pm eastern. You don't get the real-time prices during the day as you do for stocks.

As anato noted, the auto-roll feature can't be turned off on the website, but you can make a call and they'll do it for you. It's very easy -- I did it about three months ago.

Buying bonds direct is, to me, quite thrilling. It does seem to give extra peace of mind, cutting out one middleman, and it feels like you're playing with the grownups! Just make sure you express your interest in the auction before the 15th so you don't miss it.
Yeah, it's quite a bit of savings for not much extra hassle. And it places the bond in my control, not in the control of a fund. Thanks for the heads up about having to call to turn auto-roll off. Hopefully I'll never have to do that.

I actually just placed the sell order on the fund I'm going to transfer to LTT's today. So I'll be submitting the order for the 30 year treasury auction tomorrow morning when I have access to the funds. I also sold a chunk of my SHV and submitted an order for some T-Bills today. If all goes as well as I think it will then I'll swap the rest of my SHV out for T-Bills laddered out over the coming weeks. So far this is a lot easier than I thought it would be. I'm glad I started to actually look into this as opposed to just sticking with all ETF's.
Last edited by pmward on Tue Feb 05, 2019 4:47 pm, edited 2 times in total.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by pmward » Tue Feb 05, 2019 4:43 pm

anato wrote:
Tue Feb 05, 2019 3:38 pm
For 30y, I personally prefer to spread my contributions in no more than 2-3k$ each when they go on action, so I feel I have more flexibility when it comes to tax loss harvesting. I guess it's purely psychological... since I think you could sell any an integral portion of each bond holding (i.e. if you bought 15, you can sell 3 and keep 12)
I'm doing this initial one as a large chunk in my IRA (so no worries on taxes), but I'll still be adding contributions every 2 weeks to my taxable accounts when I get paid. So from here on out I'll likely I'll wind up doing the same as you, I'll just hold it as cash in my sweep account and every time they have a new auction I'll purchase a couple grand to rebalance my LTT's with everything else.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by Pet Hog » Tue Feb 05, 2019 5:03 pm

pmward wrote:
Tue Feb 05, 2019 4:36 pm
Pet Hog wrote:
Tue Feb 05, 2019 4:12 pm
Just make sure you express your interest in the auction before the 15th so you don't miss it.
So I'll be submitting the order for the 30 year treasury auction tomorrow morning when I have access to the funds.
Sorry, I made a mistake. The auction in on Thursday the 7th -- so, yes, put your order in tomorrow!
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by ochotona » Tue Feb 05, 2019 10:03 pm

Pet Hog wrote:
Tue Feb 05, 2019 4:12 pm
Buying bonds direct is, to me, quite thrilling. It does seem to give extra peace of mind, cutting out one middleman, and it feels like you're playing with the grownups! Just make sure you express your interest in the auction before the 15th so you don't miss it.
I love Fidelity auto-roll on T-Bills. I am a traitor to Schwab. I pretty much fired Marcus (Goldman Sachs Bank) after the folks here tipped me off.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by ochotona » Wed Feb 06, 2019 8:23 pm

90 day T Bills pay more than Marcus
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by pmward » Wed Mar 06, 2019 9:41 pm

anato wrote:
Tue Feb 05, 2019 3:38 pm
Only issue I found with the auto-roll is that there's no way on the website to turn it off if you change your mind and you don't want them to buy it again when it matures.
I made a purchase of 4 week T-Bills 4 weeks ago with auto-roll to test it out. I figured out how to cancel auto-roll on the website. A couple days before the auto-roll happens they show up as a pending order in the "Orders" tab on the account. It has a cancel button, and if you cancel the order it cancels the auto-roll. I have not found a way to cancel it earlier than that, other than selling them of course. But if you're as anti-social as me, at least there is a way to do it on the website without having to call and talk to someone, haha.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by anato » Wed Mar 06, 2019 11:23 pm

pmward wrote:
Wed Mar 06, 2019 9:41 pm
I made a purchase of 4 week T-Bills 4 weeks ago with auto-roll to test it out. I figured out how to cancel auto-roll on the website. A couple days before the auto-roll happens they show up as a pending order in the "Orders" tab on the account. It has a cancel button, and if you cancel the order it cancels the auto-roll. I have not found a way to cancel it earlier than that, other than selling them of course. But if you're as anti-social as me, at least there is a way to do it on the website without having to call and talk to someone, haha.
Brilliant, that's a life saver! (yeah, anti-social here too 8) )
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by sophie » Thu Mar 07, 2019 6:48 am

Did you hit the "cancel" button to see what happens? It takes you to a summary page which is a dead end. It turns out you can't cancel the auto-roll online. You have to contact Fidelity by phone.

On the other hand, I discovered that in the few days between maturity of the existing bond and purchase of the new bond, the transaction shows up as pending with a "cancel" button on the "holdings" view. That might possibly work.

I decided that for the 0.09% expense, Vanguard's Treasury MM is completely worth it. You need $50K to buy in, but there is no minimum balance to maintain once you've done that.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by pmward » Thu Mar 07, 2019 8:01 am

sophie wrote:
Thu Mar 07, 2019 6:48 am
Did you hit the "cancel" button to see what happens? It takes you to a summary page which is a dead end. It turns out you can't cancel the auto-roll online. You have to contact Fidelity by phone.

On the other hand, I discovered that in the few days between maturity of the existing bond and purchase of the new bond, the transaction shows up as pending with a "cancel" button on the "holdings" view. That might possibly work.

I decided that for the 0.09% expense, Vanguard's Treasury MM is completely worth it. You need $50K to buy in, but there is no minimum balance to maintain once you've done that.
I was indeed able to cancel. I clicked the button, and then it brought up a dialog asking me if I was sure, I clicked yes and it went in as cancelled. Maybe there was a bug in the past that they have since fixed?

I just looked up the SEC yield on that Vanguard MM and yeah it looks pretty solid. About the same SEC yield as both 4 week and 8 week bills are going for at the moment. If I were at Vanguard I would probably go that route. Instead I'll just stick with auto-roll T-Bills since it seems simple enough. What I plan to do is use SHV for DCA accumulations and maybe 2-4 times a year transfer those over to T-Bills.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by jhogue » Thu Mar 07, 2019 9:18 am

Accumulating HBPP cash in an ETF and periodically making T-Bill direct purchases sounds like a good plan to me.

What I love most about T-Bill/T-Bond direct purchase is that it gives us the option to customize our HBPP holdings at both ends of the barbell.
“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: Fidelity Bond and Bill Direct Purchase ?'s

Post by ochotona » Thu Mar 07, 2019 9:41 am

pmward wrote:
Wed Mar 06, 2019 9:41 pm
I made a purchase of 4 week T-Bills 4 weeks ago with auto-roll to test it out. I figured out how to cancel auto-roll on the website. A couple days before the auto-roll happens they show up as a pending order in the "Orders" tab on the account. It has a cancel button, and if you cancel the order it cancels the auto-roll. I have not found a way to cancel it earlier than that, other than selling them of course. But if you're as anti-social as me, at least there is a way to do it on the website without having to call and talk to someone, haha.
PMWARD great find, if you have an auto-roll purchase of 10 Bills coming up, can you edit the order and change the quantity to 5 if you want to spend the other $5000? Do you remember what the GUI looked like?
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by pmward » Thu Mar 07, 2019 10:53 am

jhogue wrote:
Thu Mar 07, 2019 9:18 am
Accumulating HBPP cash in an ETF and periodically making T-Bill direct purchases sounds like a good plan to me.

What I love most about T-Bill/T-Bond direct purchase is that it gives us the option to customize our HBPP holdings at both ends of the barbell.
I agree. I am doing the same thing with my LTT's, I accumulate in TLT and a couple times a year swap those out for LTT's. Also, currently all my cash holdings are in T-Bills, but at a certain point when I have more than enough cash built up to feel comfortable, and the yield curve becomes more beneficial to do so, I will probably start taking more risk and extending the maturity in my cash holdings a bit to include some treasury notes as well in order to chase a little extra yield. It is very nice being able to customize a bit beyond just the target maturities in the ETF's.
ochotona wrote:
Thu Mar 07, 2019 9:41 am
PMWARD great find, if you have an auto-roll purchase of 10 Bills coming up, can you edit the order and change the quantity to 5 if you want to spend the other $5000? Do you remember what the GUI looked like?
No there was no ability to do a partial cancel. It was a full cancel or nothing. So if you wanted to do a partial you would likely have to call in for that. Or cancel the whole thing and purchase back in on the next auction.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by jhogue » Thu Mar 07, 2019 3:18 pm

Pmward,

I understand and agree with your reasoning about gradually extending maturity of a portion of your T-bills. At the same time, I would caution you to do your homework on the present shape—and direction-- of the entire Treasury yield curve. Fidelity provides a useful pop-out chart titled “Fixed Income & Bond Yields” at Investment Products>Fixed Income, Bonds, & CDs>Individual Bonds>Find Bonds.

Right now, the Treasury yield curve rises out to one year. Today’s one year T-bill yield is 2.53%, favorably comparing with Vanguard’s Treasury Money Market, which has a current SEC yield of 2.35% on a weighted average life of 58 days.

However, the intermediate to long end of the Treasury yield curve has flattened over the last year and has even begun exhibiting a slight inversion over the past three months. Today’s five year T-note yields just 2.45% -- or 0.08% LESS than today’s one year T-bill. At present, my maximum maturity for STTs is one year—and I do not see that changing in the foreseeable future.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by pmward » Thu Mar 07, 2019 5:05 pm

jhogue wrote:
Thu Mar 07, 2019 3:18 pm
Pmward,

I understand and agree with your reasoning about gradually extending maturity of a portion of your T-bills. At the same time, I would caution you to do your homework on the present shape—and direction-- of the entire Treasury yield curve. Fidelity provides a useful pop-out chart titled “Fixed Income & Bond Yields” at Investment Products>Fixed Income, Bonds, & CDs>Individual Bonds>Find Bonds.

Right now, the Treasury yield curve rises out to one year. Today’s one year T-bill yield is 2.53%, favorably comparing with Vanguard’s Treasury Money Market, which has a current SEC yield of 2.35% on a weighted average life of 58 days.

However, the intermediate to long end of the Treasury yield curve has flattened over the last year and has even begun exhibiting a slight inversion over the past three months. Today’s five year T-note yields just 2.45% -- or 0.08% LESS than today’s one year T-bill. At present, my maximum maturity for STTs is one year—and I do not see that changing in the foreseeable future.

Thanks. Yeah I wouldn't be extending maturity anytime in the foreseeable future. One thing I have been debating in my head though... do you think it's beneficial to keep a few months expenses in short term bills for emergencies, or would I be better off going with full on 1 year bills since I can always sell them if I need them? It would be quite infrequent that I would need to tap into the funds. I see the tradeoffs that 1 year bills would be a little more responsive to any potential future interest rate hikes than would 4 week or 8 week bills, but the benefit being that since I would very rarely need to sell that I would probably make up more than the difference in the long run off of the extra yield. I can't seem to make up my mind which strategy would be best. I really see 3 potential strategies that I am having a hard time deciding between:

1) keeping a few months expenses in 4 week bills, and then just going full on 1 year bills after that.
2) doing a "ladder" where I have like 10k each in 4, 8, 13, and 26 week bills, then the rest in 1 year bills after that.
3) just going full on 1 year bills and just selling some if I have an emergency.

Any thoughts?
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by Kbg » Thu Mar 07, 2019 7:17 pm

Depends on your goals...I’ll assume you want to max yield, have emergency cash on hand and have no clue/active view where interest rates are going.

The basic principle would be to time the bond expiration with expected expenses...which suggests a combo of the last two. Buy shorter term over a year and as they expire renew to the 52 week to form your (monthly?) ladder.

Or pay a small fee to an etf provider so that you can get in and out of the entire amount in a couple of seconds.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by pmward » Fri Mar 08, 2019 2:22 pm

Yeah I think I'm going to work on building a monthly ladder of 1 year bills, but start off with 12k (4k per week) in 4 week bills on auto-roll while I'm building the 1 year bill ladder out. It will be a few years I'm sure before I have accumulated enough in 1 year bills laddered out every month. Once I get there I'll likely kill the 4 week bills and roll those to 1 year bills as well. In the meantime, it is probably better safe than sorry as far as keeping enough liquidity for the common run of the mill "emergencies" like car or home issues in 4 week bills. Also, once I've reached that point, that would probably be a good time to see what the yield curve is like and maybe extending maturity out on fresh accumulations. Probably at least a couple years before I get there though.

I also did decide I'm going to incorporate my 401k into my golden butterfly even though I have no access to LTT's or gold. I'm just going to have to do 25% TSM, 25% small cap, 50% total bond market (substituted for the bond barbell) in my 401k automatically rebalanced annually and then hold enough gold taxable to cover 20% of my total portfolio between all accounts combined. And outside my 401k I'm doing the proper LTT/STT barbell. So with that I've already got a bit more risk on the bond side of things because of the corporate bonds in TBM, so having all T-Bills in my non-401k accounts for the STT portion is probably a good tradeoff for the next few years at least. I've really grown quite fond of my golden butterfly after watching the way it has behaved day to day over the last couple of months, between both a melt up in the stock market over the last couple months, and now into a nice little sell off. It has been a nice little short term sampling of bull and bear environments in the short time I've held the portfolio. It handled both rather well and seems to fit my personality quite well. It is definitely true that you get a better feel for a portfolio once you've actually got some money on the line. I've also done a lot more research and all that has strengthened my convictions in the GB. So I think it's time to go all in! TBM in the 401k isn't optimal, but it works well enough in the grand scheme. At least since I've only been at this job for a year my 401k is smaller than my IRA's/taxable accounts, so it's never going to be the anywhere near the majority of my bond allocation.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by jhogue » Sun Mar 10, 2019 11:24 am

I agree with your estimation that using a TBM fund in your 401k is the kind of acceptable compromise to get started. It's more important to get started than it is to be prefect.

You may want to investigate your 401k plan provider to see if they offer a brokerage window. If so, it would give you more options that would bring you closer to a pure STT/LTT barbell.
“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: Fidelity Bond and Bill Direct Purchase ?'s

Post by vnatale » Fri Feb 07, 2020 6:40 pm

jhogue wrote:
Sun Mar 10, 2019 11:24 am

You may want to investigate your 401k plan provider to see if they offer a brokerage window. If so, it would give you more options that would bring you closer to a pure STT/LTT barbell.
For those whose access to retirement plans is through your employer, does your employer offer or not offer a brokerage window?

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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by flyingpylon » Sat Feb 08, 2020 6:36 am

vnatale wrote:
Fri Feb 07, 2020 6:40 pm
jhogue wrote:
Sun Mar 10, 2019 11:24 am

You may want to investigate your 401k plan provider to see if they offer a brokerage window. If so, it would give you more options that would bring you closer to a pure STT/LTT barbell.
For those whose access to retirement plans is through your employer, does your employer offer or not offer a brokerage window?

Vinny
My employer does. Contributions go into a primary 401k account and we have to manually transfer funds to a brokerage account with another provider, which I do about 3-4 times a year.
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Re: Fidelity Bond and Bill Direct Purchase ?'s

Post by InsuranceGuy » Sat Feb 08, 2020 7:40 pm

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