Gyroscopic Investing

Hi All

I decided to open account at Treasury Direct and made my first purchase of $3500 worth of Treasury Bonds. My TD account now shows I have $3500 in Bonds but my bank shows $3801.92 was withdrawn by TD and not $3500

What am I missing?

Confused...phil

I used the 'Purchase Express' link to buy them. I am guessing that I did not buy them at the auction but bought them after there value had risen post auction or something like that.

So should I be using the 'Buy Direct' tab and then choosing the '30-Year' bond at a future auction date? Or do you just buy what ever is available on the day and find out what the price will be later?

phil

ok learning a bit more...

http://www.treasurydirect.gov/indiv/res ... _rates.htm

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Auction Pattern
30-Year Bond
Original Issues—February, May, August, November
Reopenings—January, March, April, June, July, September, October, December

In a reopening, we sell an additional amount of a previously issued security. The reopened security has the same maturity date and interest rate as the original security. However, as compared to the original security, the reopened security has a different issue date and usually a different purchase price.
--------------------------------------------------

I am still not sure how to buy them at face value.

phil

Excuse all the replies to self, but I guess others might be as stupid as me :-) and find this helpful.

http://www.treasurydirect.gov/RI/OFNtebnd

So I think I am getting it. If you buy at the initial auction you will pay a price that is very close to the face value but could still be slightly higher or lower.

30-YEAR BOND 08-15-2011 (Price per $100) = 100.000000
30-YEAR BOND 05-16-2011 (Price per $100) = 99.916711

To do this I need to go through the 'Buy Direct' tab and choose the 30y Bond and wait for the next auction (November)

If I buy at any other time I am buying some kind of reissue and the price could be quite different from the face value depending on what has happened in the bond market since it was originally issued.

29-YEAR 11-MONTH BOND 09-15-2011 (Price per $100) =  108.310327
29-YEAR 10-MONTH BOND 07-15-2011 (Price per $100) =  102.985551

I bought the 29y 11m bond and so my $3500 face value became $3800 price. Does that all sound correct?

I guess I will be buying at the initial auctions from now on so I get less scared :-)

phil

The price premium is not due to buying at reissue vs initial, it is more the lag between the fear in the market and movement to safety, that is, LTT. So September is the first chance to buy LTTs directly after the idea of the market being volatile set into the minds of the market. Also, the Fed has said it will be or is moving into (buying) LTTs to bring down the yield. I'm not sure if they've started, but yield will likely drop and prices will likely increase as they do so. You are also paying for accrued interest

35x 108.310327 per 100 = 3790.861 for bonds
35x 0.315897 per 100 = 11.056 for accrued interest

~3801.92$ for 3500$ of this LTT sounds correct.

Thanks for the info. One more question.

What is the best way to calculate current value of your TD bonds for a monthly re balancing check etc. TLT is easy of course.

phil

captain3d wrote: Thanks for the info. One more question.

What is the best way to calculate current value of your TD bonds for a monthly re balancing check etc. TLT is easy of course.

phil

You can take the value of your bonds on the day you buy them and divide it by the TLT share price on that day.  That will give you "x" shares of equivalent TLT value, which you can then use at any later point in time to give you an approximate value of your bond holdings.

You can also just log onto your brokerage account and look at the value of your bonds.  Their value is normally updated each day.

Good idea MediumTex

I must admit having some remorse about getting involved with the Treasury Direct account. I had not fully understood what it was ie. A place that only sells treasuries (not a place that trades treasuries).

Having bought some long bonds I am now unsure how I sell them (5 - 10 years from now) to keep with the PP ideas. From what I read I have to withdraw them to a broker who will sell them for me which sounds like a PITA.

Also I have not fully understood the term 'redemption'. I was getting hopeful that the bonds could be 'redeemed' before maturity and the funds would stay inside the TD account in the C of I (http://www.treasurydirect.gov/indiv/hel ... rnMore.htm) section ready to be used to buy new 30 year bonds. If that is true then it is not so bad.

Is anyone buying long Bonds at Treasury Direct? Please tell me how it works for you.

Cheers...phil

captain3d wrote:Having bought some long bonds I am now unsure how I sell them (5 - 10 years from now) to keep with the PP ideas. From what I read I have to withdraw them to a broker who will sell them for me which sounds like a PITA.

Only Treasury Bills, Notes and Bonds are Marketable Securities. And you need to get the bonds into the Secondary Market (via a broker) in order to sell them.

It's pretty easy. You just transfer them to your broker with this form:

http://www.treasurydirect.gov/indiv/res ... s_sell.htm

Though, it would be wise to choose a broker with low fees, of course. Keep in mind that you may have to record your cost basis manually if you transfer the bonds (ask your broker).

captain3d wrote:Also I have not fully understood the term 'redemption'. I was getting hopeful that the bonds could be 'redeemed' before maturity and the funds would stay inside the TD account in the C of I (http://www.treasurydirect.gov/indiv/hel ... rnMore.htm) section ready to be used to buy new 30 year bonds. If that is true then it is not so bad.

I believe you can only redeem a bond that has reached maturity.

captain3d wrote:Is anyone buying long Bonds at Treasury Direct? Please tell me how it works for you.

I buy (and will sell) mine through Fidelity, since they have no fees or commissions for all Treasury transactions. I use TreasuryDirect for I-Bonds (as a Cash option)

Thanks Gumby

I read something about having to hold bonds more than 12 months before redemption but it makes sense that it would be at maturity otherwise why would you need to withdraw them to a broker otherwise.

Like most things I do. I will buy some more and force myself to adapt and learn the best way forwards.

phil

captain3d wrote:I read something about having to hold bonds more than 12 months before redemption but it makes sense that it would be at maturity otherwise why would you need to withdraw them to a broker otherwise.

I think you may be talking about I-Bonds. I-Bonds can be redeemed 12 months after purchase, even though they haven't matured yet. I-Bonds aren't marketable securities (i.e. you can't buy or sell them on the secondary market because since they have your name stamped on them).

I would definitely look into I-Bonds for a portion of your cash (via Treasury Direct). They are terrific.

Just out of curiosity, does Treasury Direct update your 30 year bonds value daily like a real brokerage does? Or does it just list the face value?

I'm assuming TD lets you sell the bonds prior to maturity on the secondary market, correct? Or does TD require that you transfer the bonds out into a private 3rd party brokerage prior to early selling?

TD does not provide a selling option. They must first be transfered to a broker is what I m concluding.

Also it does not update your current value. It only lists face value (not very helpful for tracking net worth)

phil

i'm curious if anyone uses TreasuryDirect to hold the 30 year bond as it will be held up to 10 years?

what about t bills?

it seems the benefit is one less intermediary (vanguard) ?