Fidelity Bond and Bill Direct Purchase ?'s

Discussion of the Bond portion of the Permanent Portfolio

Moderator: Global Moderator

anato
Junior Member
Junior Member
Posts: 2
Joined: Wed Feb 15, 2017 11:25 pm

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) )
User avatar
sophie
Executive Member
Executive Member
Posts: 2893
Joined: Mon Apr 23, 2012 7:15 pm

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.
pmward
Full Member
Full Member
Posts: 86
Joined: Thu Jan 24, 2019 4:39 pm

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.
User avatar
jhogue
Executive Member
Executive Member
Posts: 257
Joined: Wed Jun 28, 2017 10:47 am

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!"
User avatar
ochotona
Executive Member
Executive Member
Posts: 2310
Joined: Fri Jan 30, 2015 5:54 am

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?
pmward
Full Member
Full Member
Posts: 86
Joined: Thu Jan 24, 2019 4:39 pm

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.
User avatar
jhogue
Executive Member
Executive Member
Posts: 257
Joined: Wed Jun 28, 2017 10:47 am

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.
“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!"
pmward
Full Member
Full Member
Posts: 86
Joined: Thu Jan 24, 2019 4:39 pm

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?
User avatar
Kbg
Executive Member
Executive Member
Posts: 1131
Joined: Fri May 23, 2014 4:18 pm

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.
pmward
Full Member
Full Member
Posts: 86
Joined: Thu Jan 24, 2019 4:39 pm

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.
User avatar
jhogue
Executive Member
Executive Member
Posts: 257
Joined: Wed Jun 28, 2017 10:47 am

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!"
Post Reply