Treasury Bond Buying Tutorial

Discussion of the Bond portion of the Permanent Portfolio

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foglifter
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Re: Treasury Bond Buying Tutorial

Post by foglifter » Wed May 23, 2012 11:58 am

1NV3ST0R wrote: Anyone know for Fidelity if you were to purchase 10 $1000 face value 30 year bonds and then want to sell, can you sell just 5 of those original 10 or do you have to sell all 10?
I just checked - yes, you can sell even 1 bond.
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Re: Treasury Bond Buying Tutorial

Post by Greg » Wed May 23, 2012 12:55 pm

Thanks foglifter. That keeps me from having to talk to people. I can now resume my hermit lifestyle.
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Re: Treasury Bond Buying Tutorial

Post by moda0306 » Wed May 23, 2012 12:57 pm

1NV3ST0R,

Who's that a picture of?
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Re: Treasury Bond Buying Tutorial

Post by Greg » Wed May 23, 2012 1:05 pm

moda,

That's a picture of Frédéric Bastiat. Really cool 19th century french dude who helped to develop the economic term of "opportunity cost". He's got a really good little book called "The Law" which I really liked. I initially heard about him from a Ron Paul debate where the moderator asked him if he could recommend one book to read what would it be.

http://en.wikipedia.org/wiki/The_Law_%281849_book%29

Moda, I could ask the same question about what your picture is of.
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Re: Treasury Bond Buying Tutorial

Post by Xan » Wed May 23, 2012 1:12 pm

I am a big Bastiat fan myself.  Not so much a fan of Matthew Lesko though.
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Re: Treasury Bond Buying Tutorial

Post by moda0306 » Wed May 23, 2012 1:18 pm

1NV3ST0R,

It's a picture of that ridiculous guy who schemes government programs to get people money and writes books about it.  I tend to scheme the tax code for tax avoidance/deferral strategies (legal, of course).
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Re: Treasury Bond Buying Tutorial

Post by Greg » Wed May 23, 2012 1:26 pm

I wouldn't say to "scheme the tax code", just "intelligently utilizing resources for maximum monetary gain". It's obviously much easier to say that way. (sarcasm ensues)
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Re: Treasury Bond Buying Tutorial

Post by moda0306 » Wed May 23, 2012 1:29 pm

I use "scheme" around people I know won't use it against me.  People here hate taxes enough that it earns me more respect than scorn.
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Re: Treasury Bond Buying Tutorial

Post by Greg » Wed May 23, 2012 2:31 pm

Gotcha. Yay respect.

On the non-tangent of this particular thread, I'll probably be purchasing 30 year bonds in a taxable account sometime this week. I won't have my Roth IRA until July and when I get it I'll just add more 30 year bonds into there as well up to the maximum.
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Re: Treasury Bond Buying Tutorial

Post by moda0306 » Wed May 23, 2012 2:34 pm

Since rates are only at 2.8%, I'll hesitate from my usual lecture about not placing LTT's in a taxable account if you can avoid it :).
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Re: Treasury Bond Buying Tutorial

Post by Greg » Wed May 23, 2012 2:41 pm

Indeed. I'm still very new to the PP process. I initially started off in active mutual funds (YAFFX) a little less than a year ago. And I have gotten "smarter" since. I then purchased PRPFX soon after YAFFX which slowly took me on the long road towards PP and all of you people.

All of my stuff currently is in taxable accounts and since I can only put in $5000 a year into a Roth IRA (plus the money I'll be able to put into my Roth TSP starting in July), I will still have a bulk of my money initially in taxable accounts. Over time, I'm hoping that I can have this start sliding the other way.
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Re: Treasury Bond Buying Tutorial

Post by dualstow » Wed May 23, 2012 5:28 pm

hoost wrote: Vanguard also let's you buy fewer than 10.  I think the price goes up slightly though.  I'm not sure how their prices/internal markups are relative to Fidelity, I bought six bonds a couple months ago with no issues.
Sorry, I meant to say *at auction*, where Vanguard shows a minimum of ten. Fidelity lets me pick whatever number I want, so far.
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Re: Treasury Bond Buying Tutorial

Post by hoost » Wed May 23, 2012 6:01 pm

dualstow wrote:
hoost wrote: Vanguard also let's you buy fewer than 10.  I think the price goes up slightly though.  I'm not sure how their prices/internal markups are relative to Fidelity, I bought six bonds a couple months ago with no issues.
Sorry, I meant to say *at auction*, where Vanguard shows a minimum of ten. Fidelity lets me pick whatever number I want, so far.
Ah, I haven't tried to buy any at auction, so I'll take your word for it.
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Re: Treasury Bond Buying Tutorial

Post by dualstow » Thu May 24, 2012 7:34 am

hoost wrote:
dualstow wrote:
hoost wrote: Vanguard also let's you buy fewer than 10.  I think the price goes up slightly though.  I'm not sure how their prices/internal markups are relative to Fidelity, I bought six bonds a couple months ago with no issues.
Sorry, I meant to say *at auction*, where Vanguard shows a minimum of ten. Fidelity lets me pick whatever number I want, so far.
Ah, I haven't tried to buy any at auction, so I'll take your word for it.
I think I read somewhere on this forum that you get a tiny discount if you buy at auction, but I don't know if it's even true. But, the offerings come frequently enough- more frequently than any new cash coming in,  ;) so I tend to use the auctions.
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Re: Treasury Bond Buying Tutorial

Post by Greg » Thu May 24, 2012 9:55 am

Are you speaking about purchasing the treasuries at auction from a broker or from TreasuryDirect? From a broker if that meant a discount then that would be good knowledge to have. If from TreasuryDirect, I remember reading about some sort of fee to have them transfer your bond to a brokerage account so you can sell it. If it's only a form however that's not as bad, just a hassle.
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Re: Treasury Bond Buying Tutorial

Post by dualstow » Thu May 24, 2012 2:42 pm

1NV3ST0R wrote: Are you speaking about purchasing the treasuries at auction from a broker or from TreasuryDirect?
From a broker: specifically Fidelity. Treasuries are traded there with no fee whatsoever, so the "discount" has nothing to do with fees. I'll try to find the thread and post tomorrow.
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Re: Treasury Bond Buying Tutorial

Post by embitca » Fri Aug 10, 2012 8:16 pm

Gumby wrote: For those interested in owning your own Treasury bonds directly*, I've put together a series of 5 screenshots to show you how easy it is to buy Treasury Bonds at Fidelity. I
This is so very helpful to me. I've never been able to make heads or tails of these screens until now. Thank you!
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Re: Treasury Bond Buying Tutorial

Post by Kriegsspiel » Thu Sep 20, 2012 1:33 pm

The second Harry Browne radio link in the FAQ really helped me understand the whole "buying your own LTTs," but I just wanted to make sure I had my thoughts in order:

I'm using Vanguard.

1.  So, the yields aren't really important, because it'll even out in that you'll pay more for a higher yielding bond with the same maturity date than you would for one with a lower yield, so at maturity, you'd have the same amount of money?

2.  You can only buy long term treasuries in batches of $1000?  So if the "min quantity bid" was 1, at a price of 95.824, you would be paying $958.24 for that bond?

3.  Then, once you have the bonds, they show up in your brokerage account (mine is in my Roth) like stocks would.  And you can either sell them if you need to rebalance because interest rates dropped and maybe that one you bought at 95.824 is now worth 99.000 or whatever.  OR, you sell them after they've matured 10 years.  So if you bought a bond with 29 years left, you sell it 9 years later, if you've never had to rebalance and sell it prior to that?
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Re: Treasury Bond Buying Tutorial

Post by Gumby » Thu Sep 20, 2012 11:22 pm

Kriegsspiel wrote:1.  So, the yields aren't really important, because it'll even out in that you'll pay more for a higher yielding bond with the same maturity date than you would for one with a lower yield, so at maturity, you'd have the same amount of money?
Yes, in a matter of speaking. Though, you won't see different coupon rates for the exact same maturity date. You might see different coupon rates for Treasuries with slightly different maturity dates and in that case it shouldn't matter which one you purchase (tax considerations aside) since the pricing takes the differences into account. Basically, when buying 30-year bonds, you're looking for a long duration, not coupon.
Kriegsspiel wrote:2.  You can only buy long term treasuries in batches of $1000?  So if the "min quantity bid" was 1, at a price of 95.824, you would be paying $958.24 for that bond?
It seems like you're only buying 1 single $1000 bond, but in reality you're buying a basket of 10 bonds, because the Treasury officially issues 30-year bonds in $100 increments. It's confusing, I know. Call your brokerage if you have questions on this.
Kriegsspiel wrote:3.  Then, once you have the bonds, they show up in your brokerage account (mine is in my Roth) like stocks would.  And you can either sell them if you need to rebalance because interest rates dropped and maybe that one you bought at 95.824 is now worth 99.000 or whatever.  OR, you sell them after they've matured 10 years.  So if you bought a bond with 29 years left, you sell it 9 years later, if you've never had to rebalance and sell it prior to that?
Right.
Last edited by Gumby on Thu Sep 20, 2012 11:51 pm, edited 1 time in total.
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Re: Treasury Bond Buying Tutorial

Post by Kriegsspiel » Fri Sep 21, 2012 7:02 am

Gumby wrote:
Kriegsspiel wrote:2.  You can only buy long term treasuries in batches of $1000?  So if the "min quantity bid" was 1, at a price of 95.824, you would be paying $958.24 for that bond?
It seems like you're only buying 1 single $1000 bond, but in reality you're buying a basket of 10 bonds, because the Treasury officially issues 30-year bonds in $100 increments. It's confusing, I know. Call your brokerage if you have questions on this.
Right, I remember seeing that on here.  I did talk to Vanguard and while they didn't say that I would be buying 10 bonds, they did say the minimum buy quantity was... the minimum.  I did forget to ask them, is the minimum sell quantity 10 bonds also?
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Re: Treasury Bond Buying Tutorial

Post by Kriegsspiel » Fri Sep 21, 2012 9:40 am

Just did it, it was very easy!  Thanks guys.
"You haven't, I suppose, ever mixed with politicians at close quarters. They're awful. I think some of these must have been the dregs anyhow, but I've discovered, what previously I didn't believe possible, that politicians behave in private life and say exactly the same things as they do in public. Their stupidity is inhuman.
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Re: Treasury Bond Buying Tutorial

Post by Greg » Mon Oct 08, 2012 8:29 pm

Perhaps I'm somehow missing it but does Vanguard sell STRIPS? I know Fidelity does but I haven't found them on Vanguard yet.
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Re: Treasury Bond Buying Tutorial

Post by BearBones » Mon Oct 15, 2012 12:28 pm

Great thread! 4 questions:
1. Looks like I can buy LTTs directly at TDAmeritrade. Has anyone done that?
2. One should ladder different years and sell 10% (the shortest duration) each year, right? Or do you buy all 2042's and sell 10%/yr, eventually ending up with 10 yr ladder?
3. If the former, there is a gap in LTTs between 2031-36, right in the beginning of my 10 year ladder! Just buy 2036-42?
4. In talking to the bond desk at TDA, it seems that trades are "free." The commission is from slight mark-up price which the person estimated to be about 3/8% on a 10k trade. If so, it takes about 2.5 years for the ER of TLT to equal the same. Does this sound right?
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Re: Treasury Bond Buying Tutorial

Post by MediumTex » Thu Nov 01, 2012 9:18 pm

BearBones wrote: Great thread! 4 questions:
1. Looks like I can buy LTTs directly at TDAmeritrade. Has anyone done that?
I don't know.  Maybe someone else can answer that one.
2. One should ladder different years and sell 10% (the shortest duration) each year, right? Or do you buy all 2042's and sell 10%/yr, eventually ending up with 10 yr ladder?
Neither.  I would say buy all 2042's and in 2022 sell them all (you may have some other bonds that you bought along the way when you rebalanced) and buy 2052's.
3. If the former, there is a gap in LTTs between 2031-36, right in the beginning of my 10 year ladder! Just buy 2036-42?
Why are you talking about a 10 year ladder in the context of the LT bond part of the PP?  I may have missed it somewhere up-thread.
4. In talking to the bond desk at TDA, it seems that trades are "free." The commission is from slight mark-up price which the person estimated to be about 3/8% on a 10k trade. If so, it takes about 2.5 years for the ER of TLT to equal the same. Does this sound right?
I wouldn't think that the spread would be anything like 3/8%, but I haven't bought individual bonds in quite a while, so no, it doesn't sound right to me.  I would think it would be quite a bit less, but in any case I don't know that it would matter since you won't be selling most of them for at least 10 years. 

It sounds like you are asking the LT treasury bond equivalent of: "Should I buy gold krugs at $15 over spot price if they are currently buying them back for $10 under spot price if the spread per shares on GLD is tighter?"
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Re: Treasury Bond Buying Tutorial

Post by jimbojones » Fri Nov 02, 2012 9:42 am

1NV35T0R (Greg) wrote: Perhaps I'm somehow missing it but does Vanguard sell STRIPS? I know Fidelity does but I haven't found them on Vanguard yet.
Yes, one option to get there is:

Buy & Sell > View and trade bonds or CDs > Treasuries > Treasury type > Strips
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