Gyroscopic Investing

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?

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.

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.

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][/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.

Sweet, thank you!

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).

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.

Many thanks, Zed! I'm not sure what else I selected before, but leaving every other option alone worked great.

Any chance we can sticky this thread?  There is really good stuff here.

bigamish wrote: Any chance we can sticky this thread?  There is really good stuff here.

I stickied it.

bigamish wrote: Any chance we can sticky this thread?  There is really good stuff here.

Second that, this thread should be on the top.

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.

Based on the recent news about TLT, I figured it'd be a good time to go look into how to buy LTT bonds directly.  The above instructions for Fidelity are very helpful and I'll be using them when I've accumulated enough cash to need a rebalance. 

I also have an account with Vanguard and figured I'd look over their Bond desk.  But I can never get anything to show up with the searches I've done thus far.





What am doing wrong?  It's gotta be something obvious, because I can't see it!

mike

MikeK wrote: Based on the recent news about TLT, I figured it'd be a good time to go look into how to buy LTT bonds directly. 

What news about TLT did you mean? I haven't been following the market  lately...

foglifter wrote:

MikeK wrote: Based on the recent news about TLT, I figured it'd be a good time to go look into how to buy LTT bonds directly. 

What news about TLT did you mean? I haven't been following the market  lately...

http://gyroscopicinvesting.com/forum/ht ... ic.php?t=9

I just got rid of TLT and bought my first bond at Fidelity.

First I tried a limit order with price in between the bid and ask but this one somehow showed as "Cancelled" right after I clicked "Submit". Is this because bond market works differently from the stock market and there is no open orders? Anyways, after that I placed a market order and it got filled at an Ask price.

Can somebody explain what "price" actually means in the bond position? Looks like it's 1/10 of the actual price of a 1000-dollar bond. For example, my trade confirmation for buing 4 bonds says "4000 bonds filled @ $95.5312".

Thanks

foglifter wrote:First I tried a limit order with price in between the bid and ask but this one somehow showed as "Cancelled" right after I clicked "Submit". Is this because bond market works differently from the stock market and there is no open orders? Anyways, after that I placed a market order and it got filled at an Ask price.

You can certainly have open orders on Bonds. Next time, just call up Fidelity and they'll walk you through it over the phone.

foglifter wrote:Can somebody explain what "price" actually means in the bond position? Looks like it's 1/10 of the actual price of a 1000-dollar bond. For example, my trade confirmation for buing 4 bonds says "4000 bonds filled @ $95.5312".

So... the reason the market price is roughly $100 (instead of roughly $1000) is because that's what the official face value is of a bond is when you buy it directly from the Treasury...

http://www.treasurydirect.gov/indiv/pro ... glance.htm

... but Fidelity doesn't want to be in the business of selling only $100 worth or $1200 worth of Treasury bonds. They want you to buy in blocks of $1000 (i.e. 10 bond increments) — likely to keep costs down. So, to make it "easy" they just tell you that the face value is $1000 and give you the official market price (which is based on $100 bonds). It's a little confusing, but it's better than giving you an error for trying to buy 11 $100 or 15 $100 bonds — which wouldn't work since they want you to buy in blocks of ten.

Gumby wrote:

foglifter wrote:First I tried a limit order with price in between the bid and ask but this one somehow showed as "Cancelled" right after I clicked "Submit". Is this because bond market works differently from the stock market and there is no open orders? Anyways, after that I placed a market order and it got filled at an Ask price.

You can certainly have open orders on Bonds. Next time, just call up Fidelity and they'll walk you through it over the phone.

foglifter wrote:Can somebody explain what "price" actually means in the bond position? Looks like it's 1/10 of the actual price of a 1000-dollar bond. For example, my trade confirmation for buing 4 bonds says "4000 bonds filled @ $95.5312".

So... the reason the market price is roughly $100 (instead of roughly $1000) is because that's what the official face value is of a bond is when you buy it directly from the Treasury...

http://www.treasurydirect.gov/indiv/pro ... glance.htm

... but Fidelity doesn't want to be in the business of selling only $100 worth or $1200 worth of Treasury bonds. They want you to buy in blocks of $1000 (i.e. 10 bond increments) — likely to keep costs down. So, to make it "easy" they just tell you that the face value is $1000 and give you the official market price (which is based on $100 bonds). It's a little confusing, but it's better than giving you an error for trying to buy 11 $100 or 15 $100 bonds — which wouldn't work since they want you to buy in blocks of ten.

Thanks, Gumby!

Inspired by flyingpylon's excellent input on getting bond prices in real-time using Google APIs I made a screenshot that helps understand how the formula works:



The red rectangle shows the first 5 rows of the table #10 in the page source. The values are in the 2nd column, so to get the third party price (which seems to be the last close price) you would use the value in the 5th row:

=index(ImportHtml("http://fixedincome.fidelity.com/fi/FIBo ... p=CUSIP",1,10),5,2)

To get the bid price just change 5 to 1:
=index(ImportHtml("http://fixedincome.fidelity.com/fi/FIBo ... p=CUSIP",1,10),1,2)

And here's the formula for the ask price:
=index(ImportHtml("http://fixedincome.fidelity.com/fi/FIBo ... p=CUSIP",1,10),2,2)

CUSIP in the above examples should be replaced with an actual value. I found convenient to use indirect addressing by putting bond's CUSIP into a cell and referring to a cell in the formula, for example if the CUSIP is in the cell D3:
=index(ImportHtml("http://fixedincome.fidelity.com/fi/FIBo ... ORD&cusip="&$D3,1,10),2,2)

flyingpylon, thank you for educating us on this highly useful technique to get bond prices!  :)

The same method can be used for getting all kinds of data from the web, for example to get real-time gold prices (but this should go to the Gold section).

Good idea, nice job... a picture is worth a thousand words!

So I finally took the plunge today in selling my TLT and buying direct treasuries through Fidelity.  It was very simple, and honestly I don't know why I waited so long.

Just wanted to thank Gumby specifically for the very helpful guide, and everyone for all the info on TLT and owning treasuries in general.  Having a resource like this forum to guide me through good decisions makes me confident that the HBPP is something I'll be sticking with long term. 

MikeK wrote: Based on the recent news about TLT, I figured it'd be a good time to go look into how to buy LTT bonds directly.  The above instructions for Fidelity are very helpful and I'll be using them when I've accumulated enough cash to need a rebalance. 

I also have an account with Vanguard and figured I'd look over their Bond desk.  But I can never get anything to show up with the searches I've done thus far.





What am doing wrong?  It's gotta be something obvious, because I can't see it!

mike

Mike,

I had the same issue when I first tried searching for bonds with Vanguard.  What time/day were you performing the search?  I found that results only show up if you search while the market is open.  At least, after getting no results the first time (on a Sunday afternoon), I went back in on Monday morning and was able to get results.

I hope that helps.

hoost wrote: I had the same issue when I first tried searching for bonds with Vanguard.  What time/day were you performing the search?  I found that results only show up if you search while the market is open.  At least, after getting no results the first time (on a Sunday afternoon), I went back in on Monday morning and was able to get results.

I hope that helps.

Yep, you are exactly right!  Just did a search and I got a few hits.  Now, just need to figure out how to understand the results.....

mike

If anyone here has done a few Vanguard bond trades and would be willing to post a tutorial it would be MUCH appreciated by myself and others.

MikeK wrote:

hoost wrote: I had the same issue when I first tried searching for bonds with Vanguard.  What time/day were you performing the search?  I found that results only show up if you search while the market is open.  At least, after getting no results the first time (on a Sunday afternoon), I went back in on Monday morning and was able to get results.

I hope that helps.

Yep, you are exactly right!  Just did a search and I got a few hits.  Now, just need to figure out how to understand the results.....

mike

I used the quick searches on the left hand sidebar.  Choose secondary treasury.  Then Bonds, 15 to 30 year.  They're sorted by maturity descending (at least for me).  The longest right now is 2/15/2042; it says min qty is 100, but I bought 6 last week and didn't have any issues.  Click buy on the left side and it will take you into the buying menu; should be straight-forward from there if I recall.

rgds,

hoost