Treasury Bond Buying Tutorial

Discussion of the Bond portion of the Permanent Portfolio

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SteveGo
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Re: Treasury Bond Buying Tutorial

Post by SteveGo » Thu Nov 17, 2011 10:05 am

Just bought some myself. For the LT's buy the longest dated ones you can IMO.

You pay accrued interest, when you buy. That is the interest that has accumulated since the last coupon payment. When the coupon comes due, you get the full interest payment, so you get that money back at that time. On the other side of the trade, the seller gets that accrued interest for the time he has held the bond since the last interest payment.

The 11/15 Bond pays in May 15 and Nov 15, so right now there is not much accrued interest.

When I value my bond and note holdings, I add in the accrued interest, since that would be what I would receive if I sold them.




ZedThou wrote: I've given up on the idea of trading treasury bonds in my Scottrade Roth IRA and have transferred the assets to a Fidelity Roth IRA. I'm about to sell TLT and buy bonds, and just wanted to make sure there was no reason to avoid the just-issued 11/15/2041 maturity treasury bonds - CUSIP 912810QT8. For the purposes of the Permanent Portfolio, they are just fine?
Last edited by SteveGo on Thu Nov 17, 2011 10:09 am, edited 1 time in total.
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Re: Treasury Bond Buying Tutorial

Post by foglifter » Tue Nov 22, 2011 12:23 am

Gumby,

I haven't bought bonds at Fidelity yet so I wanted to ask you:
When you look at your bond position in the Fidelity account is the current price (real-time or last close) displayed as it is displayed for stocks/ETFs/funds? I'm talking about the Positions view of the Accounts & Trade -> Portfolio page.
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Re: Treasury Bond Buying Tutorial

Post by rickb » Tue Nov 22, 2011 10:25 am

foglifter wrote: When you look at your bond position in the Fidelity account is the current price (real-time or last close) displayed as it is displayed for stocks/ETFs/funds? I'm talking about the Positions view of the Accounts & Trade -> Portfolio page.
Yes, it is.
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Re: Treasury Bond Buying Tutorial

Post by Gumby » Tue Nov 22, 2011 11:50 am

rickb wrote:
foglifter wrote: When you look at your bond position in the Fidelity account is the current price (real-time or last close) displayed as it is displayed for stocks/ETFs/funds? I'm talking about the Positions view of the Accounts & Trade -> Portfolio page.
Yes, it is.
They update the value of the bonds once a day...For example, here is what an account would look like when looking in the Cost Basis tab:

[align=center]Image[/align]

Just be aware that the bond values are not real time. They tend to post the bond values late at night for some reason (much later than the mutual funds).

You'll also notice there is a little "d" next to the cost basis of the bonds. In fine print, the little "d" says:
d - For fixed income securities, adjusted cost basis reflects any cumulative original issue discount, premium, or acquisition premium (including any year-to-date amount). It assumes such amounts were amortized or accrued for tax purposes from the acquisition date through the disposition date (or, for securities still held, through the maturity date). Premium amortization was calculated using the yield-to-maturity method. Acquisition premium was calculated using the ratable accrual method. Any market discount accretion for this position was calculated using the straight-line method and, if applicable, recognized upon disposition. Gain/loss displayed for this position is calculated using the cost basis adjustments as described above. The adjusted cost basis used here may not reflect all adjustments necessary for tax reporting purposes (such as wash sale adjustments) and may not apply if you are using an alternative amortization calculation method. Refer to IRS Publication 550, Investment Income and Expenses, for additional information.
Last edited by Gumby on Tue Nov 22, 2011 12:11 pm, edited 1 time in total.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
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Re: Treasury Bond Buying Tutorial

Post by foglifter » Tue Nov 22, 2011 2:06 pm

Sweet, thank you!
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Re: Treasury Bond Buying Tutorial

Post by dualstow » Mon Jan 30, 2012 9:01 am

Gumby (or anyone): Have you ever bought zero coupon bonds via Fidelity?

I'm thinking about buying some for my vp in the future. I've bought 30-year treasuries in Fidelity using the auction. I never see offerings of zeroes in the 'fixed income offerings' emails I get from Fidelity. Those emails mention treasury auctions (all maturities), CDs, "structured products" and individual corporate bonds, but no zeroes.

I can see from your tutorial that you can include them in the search of the U.S. Treasury Secondary market, but my search didn't turn anything up. Maybe I'm doing it wrong.

I do hold some EDV, but I'm curious about buying zeroes directly in my 401(k).
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Re: Treasury Bond Buying Tutorial

Post by ZedThou » Mon Jan 30, 2012 6:12 pm

dualstow, if I go to http://fixedincome.fidelity.com/fi/FISe ... chTreasury and leave everything default except select "Yes" for both Call Protection and Zero Coupon, lots of STRIPS come up. Seems like the key is Type=All.
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Re: Treasury Bond Buying Tutorial

Post by dualstow » Mon Jan 30, 2012 9:54 pm

Many thanks, Zed! I'm not sure what else I selected before, but leaving every other option alone worked great.
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Re: Treasury Bond Buying Tutorial

Post by bigamish » Tue Jan 31, 2012 6:44 am

Any chance we can sticky this thread?  There is really good stuff here.
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Re: Treasury Bond Buying Tutorial

Post by MediumTex » Tue Jan 31, 2012 9:54 am

bigamish wrote: Any chance we can sticky this thread?  There is really good stuff here.
I stickied it.
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Re: Treasury Bond Buying Tutorial

Post by foglifter » Tue Jan 31, 2012 12:00 pm

bigamish wrote: Any chance we can sticky this thread?  There is really good stuff here.
Second that, this thread should be on the top.
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Re: Treasury Bond Buying Tutorial

Post by Gumby » Tue Mar 13, 2012 5:04 pm

mdsw wrote:I just thought I'd add that Vanguard does not charge a fee for the purchase of Long-Term Treasuries through the Vanguard Brokerage account. Someone posted earlier that Vanguard charges a fee (unlike Fidelity) per purchase for all accounts, but that was for stocks and non-Vanguard ETFs.
Actually, the statement was accurate when the post was originally written as Vanguard used to charge a fee to buy and sell Treasuries. Vanguard only recently changed its fee structure to match Fidelity.
Last edited by Gumby on Tue Mar 13, 2012 5:48 pm, edited 1 time in total.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
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