Buying the 30yr Bond

[Jan Van]

Just an FYI, in case you're wondering. As per last night the bond showed:
U S TREASURY BOND CPN 3.87500 % MTD 2040-08-15 DTD 2010-08-15  value: $15,862.50

So Vanguard keeps updating the value of the bonds in your brokerage account...

[MediumTex]

So Vanguard keeps updating the value of the bonds in your brokerage account...

The value is updated daily, but not intra-day (unless you are buying or selling).

TLT obviously provides a good proxy, though, for people who like to keep an eye on things.

[dualstow]

I need to sit down and go through these scenarios a bit. When I setup my portfolio I just wanted to get it done and I use the bond income for living expenses so I didn't think about it in all of these levels. I'm not sure in the end how much it really matters, but I need to find some time to do the numbers and look at things.

Based on how well the bonds performed in 2008, my gut instinct is anything in the 25-30 year range regardless of coupon rate is probably fine.

I, too, "just want to get it done." While I've been trading stocks & funds online for years and years, I'm not excited about calling the bond desk and placing an order because I find individual bonds confusing. I wrote to Fidelity -- that's where my 401(k) is -- and asked if I could just call the desk and have them buy approximately $10,000 worth of 30-year treasury bonds, or if it was more complicated than that. They gave me the telephone number but no straight answer. Shrug.

Can anyone tell me what sort of questions I'll be asked during the ordering process so that I can prepare? I'd sincerely appreciate it.

[Storm]

Dualstow, call the Fidelity 1-800 number, ask for the fixed-income department, and tell them you want to know all about buying treasuries in the primary and secondary markets.  They will completely explain everything to you.  I have my 401k with Fidelity and the guy spent about 30 minutes with me, walking me through exactly how to purchase them online - it's very easy.  He even warned me of the risks of buying bonds (inflation could cause a drop in value).  I am very impressed with Fidelity's customer service.

[dualstow]

Will do, thank you.

[dualstow]

Well, confession time. When I browsed the fixed income desk at Fidelity I saw that, unlike the case with Vanguard's bond desk, I could order online. So, I never did make that phone call. The offering that I saw mentioned today's date, 12/9, so even though I placed the order last week, it kicked in this afternoon. I am now the proud owner of a few bonds.

Before I clicked submit, it was made clear that each instrument was $1,000.

I did write to Fido's customer service because when I ordered 8, that was later displayed as "Quantity: 8000" in the confirmation I received. Not $8000, but Quantity of 8,000. This was slightly disconcerting, because elsewhere there was a price displayed which, when multiplied by 8,000 totaled a lot more than the value of my account.

Common sense said that everything was fine, but I wrote anyway, and the other day they confirmed that all is well, that I ordered properly. Of course, in my holdings it now says I have 8,000 shares of blah-blah-blah at a price of 96.797 each , but I won't give it a thought until I actually talk to the desk someday.

This sure has been a different experience from exchanging into VUSTX.

[Jan Van]

I did write to Fido's customer service because when I ordered 8, that was later displayed as "Quantity: 8000" in the confirmation I received. Not $8000, but Quantity of 8,000. This was slightly disconcerting, because elsewhere there was a price displayed which, when multiplied by 8,000 totaled a lot more than the value of my account.

Funny to see this works the same way as at Vanguard :-)

[dualstow]

I did write to Fido's customer service because when I ordered 8, that was later displayed as "Quantity: 8000" in the confirmation I received. Not $8000, but Quantity of 8,000. This was slightly disconcerting, because elsewhere there was a price displayed which, when multiplied by 8,000 totaled a lot more than the value of my account.

Funny to see this works the same way as at Vanguard :-)

Ha, does it? Maybe it's some kind of archaic standard. In Account Positions view in Fido, the price is 96.797. But "8000" is an active link and when I click it, it does produce a more reasonable figure: "Avg cost per share: $0.97". I'm sure this would have all been explained to me if I had just taken Storm's advice and picked up the phone, but like I said, common sense says it's fine.

[Storm]

I saw the same thing when I bought my bonds at Fidelity.  I think the reason is that you are buying a $1000 bond, but it is denominated in single dollar increments, so quantity 8 = $8000 face value of the bond (not the value upon maturity).

I'm pretty confident that they did the right thing, however.  Fidelity couldn't stay in business for very long by giving us 1000x the bonds that we actually purchased.