2024-01-14
🇺🇸 background
- zero coupon: buy at discount and receive face value at maturity;
see nothing until maturity date
- TBills (<1yr maturity) are distinct from TBonds (20yr+) and TNotes (in between)
- from investopedia:
TBills taxed only at the fed level,
and the interest is treated as income
fidelity interface
- can buy new issue treasuries sans fees
- can setup "autoroll" to reinvest short-term TBills into similar new (new-issue?) vehicles when things mature
- example:
912797GE1 from Aug 2023 will auto-roll in Feb 2024;
its auction results at the time were 5.24% median rate;
this auto-rolled to 912797JU2 which is for 26wks and had a price of $97.4798 / $100;
I believe it auto-rolls to something with the same duration,
and in this case the rate is comparable, ~5%
examples
- can lookup the CUSIP ID, e.g.
912797FH5,
- this one matures 05/16/2024
- acquiring $25k face value in May 2023 would cost ~$23,825,
a $1,175 discount from the face value, or 4.7%
- hm but quoted bid yields are 5.29% so I think I'm not understanding something
912797JH1
- matures 03/12/2024
- acquiring $75k face value in mid Jan 2024 would cost ~$74,384,
a $616 discount from face value (0.82%);
this two month rate tracks to the expected annual rate of ~5%
vs money market
- Fidelity holds this in
SPAXX
- this will be mostly taxed as ordinary income
- latest 7 day yield is 4.98%, compounded daily,
and this is net of the expense ratio
why not TNotes?
- for one, they are just issued less often by their nature, and so are a bit less accessible
- but there is an upcoming issue on Jan 18th, maybe I'll check that out;
update: yeah three notes now available:
around 4% expected yield for each,
maturity in '26, '29 and '31,
semi-annual coupon.
Reminder: they're subject to federal income tax but no state/local taxes.