Buying / Selling Treasuries at Schwab, Not Exactly Commission Free

[SteveGo]

You can purchase Treasuries at Schwab for no commission, and that all works great. But when looking at my positions page, there was not a link (which is normally there) to trade out of the bond positions. I called the bond desk, and they told me that all sells must be done by phone, for which they tack on a $25 fee for the trade.

So, Treasuries are not exactly commission free at Schwab, if you need to sell them.

Just FYI,
Steve

[AdamA]

So, Treasuries are not exactly commission free at Schwab, if you need to sell them.

Good to know.

Thanks.

Seems a little bit underhanded...

[murphy_p_t]

$25 seems pretty good...do they also build in a spread for the house? I think that Scottrade does this...I figured this out when comparing the price of a bond to Vanguard

[cabronjames]

is Fidelity then the only broker that doesn't charge a commission for buying or selling 30 yr T-Bonds?  Is there no commission upon buying either way - at auction buying from the Treasury or "secondary market" buying from some non-Treasury intermediary?

is there any sense of what the bid-ask spread is when buying a 30yr T-Bond at auction?  spread when buying a 30 yr T-Bond on the secondary market? spread when Selling a 30 yr T-Bond on secondary market?  I've heard the notion of "the T-Bond market is the most liquid financial market on earth".  But isn't that liquidity lessened somewhat because there is several different existing 30 yr T-Bonds (such as the bond maturing on 2041-May-15 , 2041-Feb-15, etc)?  Whereas OTOH there is only 1 version of TLT or EDV.

For reference, EDV's avg bid ask spread ratio is 0.32%
https://advisors.vanguard.com/VGApp/iip ... daskspread

TLT's avg bid ask spread ratio is 0.01%
http://seekingalpha.com/symbol/tlt?sour ... eral&s=tlt

thx in advance.

[SteveGo]

Schwab claims there is no mark up. Since they only quote buy prices, you cannot see a spread directly on their site. Right now at Schwab I am only holding T-Bills and 2-3 year Notes, which I intend to let mature. I bought my LT bonds at Vanguard (IRA), and they are $40 per trade, and at TradeKing where they are $24.95 per trade. On both of those sites you can see the book, and the spreads.

If I decide to try Schwab for the LT Bonds, I will call and ask further about the spread if any.

$25 seems pretty good...do they also build in a spread for the house? I think that Scottrade does this...I figured this out when comparing the price of a bond to Vanguard

[murphy_p_t]

$25 seems pretty good...do they also build in a spread for the house? I think that Scottrade does this...I figured this out when comparing the price of a bond to Vanguard

also, there is a markup by Scottrade, as the same bond costs more than it does at vanguard, as i recall...haven't looked @ this lately..."commission free" really means "commission hidden"...has anyone analyzed this in any detail?

[MarySB]

USAA charged me 1.5% to trade early out of my zero coupon bond. That was in addition to the lower value of the bond. It turned out to be worth it, since I turned around and started my PP allocation. Still, it left a bad taste in my mouth.

For the other zero, I waited til it matured, with no charge assessed. 

[ZedThou]

$25 seems pretty good...do they also build in a spread for the house? I think that Scottrade does this...I figured this out when comparing the price of a bond to Vanguard

also, there is a markup by Scottrade, as the same bond costs more than it does at vanguard, as i recall...haven't looked @ this lately..."commission free" really means "commission hidden"...has anyone analyzed this in any detail?

I looked at Scottrade's offerings last weekend, see my posts at http://gyroscopicinvesting.com/forum/ht ... php?t=6.30 for more details. The cost to buy was simply too high for me, so I went to Fidelity instead. I assume there would be a similar cost to sell at Scottrade, but to do so you have to ask for a quote of the price at which they will buy back the bonds, which I in fact did request, and no one ever got back to me.

[Tortoise]

I hold my LT Treasures at Schwab since that's the brokerage account my company's 401(k) offers.

I agree, it's a bit annoying that Schwab isn't more up-front about the $25 sell commission, but how often does the typical PP investor of working age need to sell LTTs? Since 1972 I think it's been something like every 3 years, on average, due to rebalancing events (if I recall correctly).

A $25 sell fee every 3 years averages to about $8/year.

Just wanted to put Schwab's LTT sell commission in proper perspective.

[james_bob]

Good morning, I have something to add that may be of interest. Recently I emailed Schwab about their policy regarding treasury sales. I asked two simple questions: (1) will I be required to make a phone call in order to sell treasuries, and (2) will I need to pay a commission for the call and/or sale.

Recall that on the Schwab commissions page (schwab.com > pricing and services > fees and minimums > commissions > fixed income) they clearly state that commissions on treasuries are $0, with a $25 fee for broker-assisted (i.e. phone call) trades. There is nothing to indicate that treasury sales are treated differently than treasury purchases, or that a phone call is necessary to sell, but not to buy.

Well, I recieved a fairly prompt and enthusiastic reply from the sales rep. However, it soon became clear that his objective was to get me on the phone (moving the ball to his court), rather than answer my email questions (on my court). He danced around my original (very simple) inquiry and insisted that I call and speak to him directly.

I replied back that my phone was down and that I only needed a quick answer to those two questions (being quite courteous about it). Lo and behold, he never replied back. Left me hanging without a straight answer. Of course, at this point the question could be considered "answered".

In conclusion, if you sell treasuries at Schwab, not only will you need to get on the phone with them, but you will pay $25 for the privilege of it. But that's not what really bothers me. What really bothers me is the fact that they aren't honest about it, even when asked directly and specifically about the issue. For this reason I cannot consider Schwab a "tier 1" brokerage in the same league as Vanguard and Fidelity. If you are shopping for a PP brokerage, I do not recommend looking at Schwab unless you already have accounts at both Vanguard and Fidelity and are looking to diversify further. After all, lord only knows what else they aren't being honest about.

[rocketdog]

Thanks for the informative first post, james_bob.  5 out of 6 of our (my wife and I) retirement accounts are at Schwab, since that is where our previous financial advisor had our IRA accounts, and it's where her company has its 401k plan.  I don't hold any LTT at Schwab, but this is good to know. 

I also have a 401K at Fidelity, so I don't do any "real" trading there, but I do like their reports much better than Schwab's.  Fidelity lays everything out very clearly: 

"Here is what you had at the beginning of the reporting period"
"Here is what you contributed during the reporting period"
"Here is what your employer contributed during the reporting period"
"Here is what you added (bought) during the reporting period"
"Here is what you took out (sold) during the reporting period"
"Here is what you had at the end of the reporting period"

I'm able to update my tracking spreadsheet very quickly using Fidelity's reports.  With Schwab the reports are a bit more laborious and difficult to extract the data I need.  I don't find them to be user-friendly at all.  Which is strange, because I thought their trading platform was very user-friendly when I set up our portfolios. 

[gap]

james_bob:
It is difficult to find only one cockroach