Treasury Bond Buying Tutorial

[Mark Leavy]

STILL doing my research and wanting as many questions answered prior to implementing...

I received these quotes from my bank...

"Extra small 3”x5”24” (3” high, 5” wide and 24” long) with an annual box rental fee of $30

Small 3”x10”24” (3” high, 10” wide and 24” long) with an annual box rental fee of $60"

How many ounces of gold would I be able to put in each of the two boxes? I assume twice as many in the second as the first?

300 ounces fits easily in the extra small box.
You will need to start eating meat before you can fill the larger box and lift it over your head.

Which is about as likely as you ever actually implementing a Permanent Portfolio.

[vnatale]

STILL doing my research and wanting as many questions answered prior to implementing...

I received these quotes from my bank...

"Extra small 3”x5”24” (3” high, 5” wide and 24” long) with an annual box rental fee of $30

Small 3”x10”24” (3” high, 10” wide and 24” long) with an annual box rental fee of $60"

How many ounces of gold would I be able to put in each of the two boxes? I assume twice as many in the second as the first?

300 ounces fits easily in the extra small box.
You will need to start eating meat before you can fill the larger box and lift it over your head.

Which is about as likely as you ever actually implementing a Permanent Portfolio.

Thanks. I now seem to have estimated ranges of 300 to 500 coins fitting in the small. Calculating the weight of 400 came out to 25 pounds.

By the way even at my age (70) and weight (145 lb) I am able to dead lift 190 lb and press 75 lbs over my head. So seems I could lift that larger box of 37.5 lbs (using your 300 amount) over my head. I do use 35 pound plates for some of my barbell exercises.

[vnatale]

I think you’re right, but things have changed since then anyway. Craig mentions Vanguard’s “Bond Desk” and I don’t think they even use the term anymore. You used to have to call to order bonds, hence the desk.

There’s some good info on page 8, beginning with Krieg’s post.

I would post a tutorial if i thought I could cover everything that a new buyer of bonds would like to do.
I only know how to do what I do, which doesn’t require a tutorial because it is so limited. (For example, I almost always use the auctions, not the secondary market).
I have always just clicked my way through it. It was easy.

Why is that the case for you?

Today I read in my forum notes (from probably somewhere in this topic) someone making the case the of where buying on the secondary market was more advantageous than at auction.

[vnatale]

Vinny I just took some screenshots, since I'm not sure if you've tried it before... In your brokerage, click on Buy and Sell, then Trade Bonds or CDs

v1.png

Now, here it looks like Vanguard has changed it, because the quick search here used to go out to 30 years, not just 10:

v2.png

But you can just click on Treasuries from that top menu:

v3.png

v5.png
v4.png

Click the buy button, then say how many you want, and buy them. You can buy and sell less than the "min qty" but you won't get the advertised price/yield.

Many thanks for this. I finally reached a point in my process wherein I could review this in detail. I have some questions on your final comments. I attempted to answer them on my own but after I just logged into my Vanguard account it would not let me go beyond a certain point due to the markets not currently being open.

My questions are in regards to the first two columns - "Qty." and "Min qyt." I assume the that the first one is in $$? $5,000? But I cannot tell what the "250's" represent. Not $250? Not 250 bonds, as that would be $250,000 worth (if $1,000 each or $1,250,000 if in blocks of $5,000). But maybe they are. Not at all clear to me.

If you don't get the advertised price / yield for not buying or selling the minimum what do you get? How close is it to the advertised?

[dualstow]

I think you’re right, but things have changed since then anyway. Craig mentions Vanguard’s “Bond Desk” and I don’t think they even use the term anymore. You used to have to call to order bonds, hence the desk.

There’s some good info on page 8, beginning with Krieg’s post.

I would post a tutorial if i thought I could cover everything that a new buyer of bonds would like to do.
I only know how to do what I do, which doesn’t require a tutorial because it is so limited. (For example, I almost always use the auctions, not the secondary market).
I have always just clicked my way through it. It was easy.

Why is that the case for you?

Today I read in my forum notes (from probably somewhere in this topic) someone making the case the of where buying on the secondary market was more advantageous than at auction.

Once when this came up, somebody wrote that some people just like that new bond smell. I think that’s as good a reason as any. I’ve heard the opposite of what you’ve heard, i.e. that the auction gives a slight advantage, but that’s not why I used the auction.

(Meanwhile, outside, the pp, I used the secondary market for ten-year notes. I used the auction for notes with a 2031 maturity, but later I kept sporadically collecting more on the secondary market. I just kept seaching for the CUSIP of what I already owned, or clicking BUY next to that holding in Vanguard’s Balances and Holdings view).

[dualstow]

For the third time in a row (over a period of months), my old system has failed me.

Used to only buy at auction. If I don't buy in an auction, I buy from secondary *by looking at yield-to-worst.*
Lately, when the trade settles and I see my new statement, the estimated yield is nowhere near the yield-to-worst.
Bought some 2-year notes recently when the yield was over 5%. Because I only bought $10K worth, that was lowered to 5.0% even.
But, according to the statement, the estimated yield was just $75, matching the coupon and not yield-to-worst. Is it possible the statement is just wrong. I don't think so. I sell right away instead of waiting to find out.

I asked Vanguard's help desk about this in the past, but they didn't know the answer and said I would have to call their Fixed Income department. I have not done so. I think I'll stick to auctions from now on.

[Pet Hog]

the estimated yield was just $75, matching the coupon

Is it just something like you bought 11 bonds (each $1000 face value) for $10,000 (i.e., you bought at a discount, say for $900 each) with a coupon yield of 0.75%, so you get a coupon of $75 each year, and ultimately the bonds will mature for $11,000, so that's where the extra $500-ish per year will come from?

[dualstow]

I do seem to usually get the bonds at a slight discount, but I don’t think the difference makes up the lost yield, which should have been 5%. I’ll check…
EDIT: while it’s not quite there, Pet Hog, it is so much closer that I can’t believe I didn’t notice! Thank you.

I mean, I’ve almost always just gotten the yield I was expecting, as interest. But I have also bought t-bills in which there was of course no yield payment and I had to calculate from the discount to ensure that I was receiving what was anticipating. Therefore, a rookie mistake on my part. I guess I’ve been spoiled all these years.

(This is a 2YR note and it comes out to 4.7% with the estimated yield plus discount).
EDIT2: And, I should add, yield-to-worst is not an ironclad yield guarantee.