Schwab cancels T bill rollovers due to negative rate fears
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Schwab cancels T bill rollovers due to negative rate fears
Just got this notice in my email since I had auto-rollover going for T bills there:
"As we evaluate the current climate, we feel that upcoming Treasury auctions could possibly produce a negative interest rate. Participating in a Treasury auction with a negative interest rate would result in the loss of part of your investment and a negative rate of return. To prevent this possibility, we will not place any new rollover orders on your behalf, effective immediately."
Schwab's pure Treasury MM fund has an ER of .35% which is why I went the "roll-your-own" route in the first place, but I think the new normal during this crisis for at least some "retail" investors anyway is going to be to replace the T bills with short-duration CDs. One local credit union here in AZ offers 6 month CD's at 1.55% and 12 at 1.60%. Far better return plus local access to cash (heck their money market account at .05% is the same as current T bills), and of course there are plenty of online banks and other great local credit unions worth checking into.
Of course I still keep the majority of my "cash" position in a short-term Treasury fund but having a few years of living expenses in accessible cash earning a positive rate of return seems more important than ever in these days of unprecedented volatility.
"As we evaluate the current climate, we feel that upcoming Treasury auctions could possibly produce a negative interest rate. Participating in a Treasury auction with a negative interest rate would result in the loss of part of your investment and a negative rate of return. To prevent this possibility, we will not place any new rollover orders on your behalf, effective immediately."
Schwab's pure Treasury MM fund has an ER of .35% which is why I went the "roll-your-own" route in the first place, but I think the new normal during this crisis for at least some "retail" investors anyway is going to be to replace the T bills with short-duration CDs. One local credit union here in AZ offers 6 month CD's at 1.55% and 12 at 1.60%. Far better return plus local access to cash (heck their money market account at .05% is the same as current T bills), and of course there are plenty of online banks and other great local credit unions worth checking into.
Of course I still keep the majority of my "cash" position in a short-term Treasury fund but having a few years of living expenses in accessible cash earning a positive rate of return seems more important than ever in these days of unprecedented volatility.
Re: Schwab cancels T bill rollovers due to negative rate fears
Interesting development.
This morning, I checked the Treasury yield curve at Fidelity and noted something I had never seen before-- no 3 month and no 6 month T-bills available.
With the 30 year T-bond yielding only 1.45%, the entire Treasury yield curve has a negative real yield right now.
This morning, I checked the Treasury yield curve at Fidelity and noted something I had never seen before-- no 3 month and no 6 month T-bills available.
With the 30 year T-bond yielding only 1.45%, the entire Treasury yield curve has a negative real yield right now.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
Re: Schwab cancels T bill rollovers due to negative rate fears
Wow. Thank you for alerting us. I wonder what Fidelity will do if a negative T bill comes up. Will have to keep an eye on the next rollover.
Re: Schwab cancels T bill rollovers due to negative rate fears
Yup. Moving all cash from maturing T-Securities to banks. Live Oak Bank has a savings rate of 1.75%. I just moved money there from Ally.
Re: Schwab cancels T bill rollovers due to negative rate fears
Never thought I would live to see the day where PP forum members start cautioning each other to ditch T-bills in favor of bank accounts.
Re: Schwab cancels T bill rollovers due to negative rate fears
- vnatale
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Re: Schwab cancels T bill rollovers due to negative rate fears
After I finally made my big move last Monday switching nine money market accounts to the most intense Treasury Bill money market accounts that I could find!
Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
Re: Schwab cancels T bill rollovers due to negative rate fears
Check your bank health, and split it up amongst several banks.
https://www.depositaccounts.com/banks/health.aspx
https://www.depositaccounts.com/banks/health.aspx
Re: Schwab cancels T bill rollovers due to negative rate fears
I think I bonds at treasury direct are still at 2.22 percent. You can purchase 10k per family member.
Re: Schwab cancels T bill rollovers due to negative rate fears
The last thing I would do with T bill money is put it in a bank! Are you serious???? If we slide into a depression and banks start failing with the federal government already having spent trillions on stimulus packages, I'm not sure the FDIC guarantee is going to mean much.
I had in mind watching this page for negative T bill rates:
https://www.treasury.gov/resource-cente ... data=yield
If I spot them I'll just cancel the next rollover and move the money into a Treasury MM fund. Fidelity and Vanguard won't put those into negative interest territory. They will instead close the funds to new investors and/or set a high account minimum just like they did in 2008-2009.
I had in mind watching this page for negative T bill rates:
https://www.treasury.gov/resource-cente ... data=yield
If I spot them I'll just cancel the next rollover and move the money into a Treasury MM fund. Fidelity and Vanguard won't put those into negative interest territory. They will instead close the funds to new investors and/or set a high account minimum just like they did in 2008-2009.
- mathjak107
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Re: Schwab cancels T bill rollovers due to negative rate fears
what are the ramifications with negative rates when it come to treasury money markets at the major brokerages vs say BIL
Re: Schwab cancels T bill rollovers due to negative rate fears
The 2, 3, and 6 month yield 0.05%. The BIL expense ratio is 0.1359%. So that's -0.0859% right there. Use a bank!mathjak107 wrote: ↑Sun Mar 22, 2020 11:51 am what are the ramifications with negative rates when it come to treasury money markets at the major brokerages vs say BIL
Re: Schwab cancels T bill rollovers due to negative rate fears
I could not agree more!sophie wrote: ↑Sun Mar 22, 2020 11:23 am The last thing I would do with T bill money is put it in a bank! Are you serious???? If we slide into a depression and banks start failing with the federal government already having spent trillions on stimulus packages, I'm not sure the FDIC guarantee is going to mean much.
I had in mind watching this page for negative T bill rates:
https://www.treasury.gov/resource-cente ... data=yield
If I spot them I'll just cancel the next rollover and move the money into a Treasury MM fund. Fidelity and Vanguard won't put those into negative interest territory. They will instead close the funds to new investors and/or set a high account minimum just like they did in 2008-2009.
The last thing that I want to do with my cash in the face of a deflationary recession and possible depression is to dump Treasurys and buy something that has any more risk.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
- mathjak107
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Re: Schwab cancels T bill rollovers due to negative rate fears
fdlxx shows a much higher expense .ochotona wrote: ↑Sun Mar 22, 2020 12:27 pmThe 2, 3, and 6 month yield 0.05%. The BIL expense ratio is 0.1359%. So that's -0.0859% right there. Use a bank!mathjak107 wrote: ↑Sun Mar 22, 2020 11:51 am what are the ramifications with negative rates when it come to treasury money markets at the major brokerages vs say BIL
Re: Schwab cancels T bill rollovers due to negative rate fears
If Craig were still around, I suspect he would call it "yield-chasing" to transition T-bills to bank accounts to avoid negative yield.
Safety has a cost. And in a low or zero interest rate environment, that cost might be negative yield. How is that qualitatively different than T-bill investors settling for slightly lower yield than bank accounts in a positive interest rate environment?
Safety has a cost. And in a low or zero interest rate environment, that cost might be negative yield. How is that qualitatively different than T-bill investors settling for slightly lower yield than bank accounts in a positive interest rate environment?
Re: Schwab cancels T bill rollovers due to negative rate fears
From the PP book:sophie wrote: ↑Sun Mar 22, 2020 11:23 am The last thing I would do with T bill money is put it in a bank! Are you serious???? If we slide into a depression and banks start failing with the federal government already having spent trillions on stimulus packages, I'm not sure the FDIC guarantee is going to mean much.
I had in mind watching this page for negative T bill rates:
https://www.treasury.gov/resource-cente ... data=yield
If I spot them I'll just cancel the next rollover and move the money into a Treasury MM fund. Fidelity and Vanguard won't put those into negative interest territory. They will instead close the funds to new investors and/or set a high account minimum just like they did in 2008-2009.
"Ultimately, whether to use a CD or other bank account for the cash in a Permanent Portfolio is a decision that each investor must make for himself. In practice, many people use a hybrid approach where the bulk of their cash is in a solid and safe T-Bills [MM account] and a portion is in a bank to handle immediate expenses and emergencies."
That seems to me to be a very reasonable "both/and" approach. I also think it's pretty unrealistic to think that "full faith and credit" of the U.S. government is going to mean a whole lot if things get bad enough for FDIC and NCUA insurance to fail. If we get to that point it'll be time to head to the bunker full of MRE's, ammo and gold bullion so many Bogleheads think we PP'ers already live in.
I do think it's realistic to expect Vanguard's Treasury MM account to close again soon. I well remember that itg was closed for years right at the time the PP book came out. It's the only such fund I've found that has a low ER (.09%). Schwab's by comparison is .35%. Guess whose returns will go negative first.
Personally I'm keeping about a year's worth of cash earning ~1.30% in my excellent local credit union and the rest in STT funds divided between two brokerages. Mnuchin has already threatened to limit trading hours or perhaps even close the markets from time to time so diversification of cash makes more sense than ever IMHO.
- vnatale
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Re: Schwab cancels T bill rollovers due to negative rate fears
I'm with your logic 100%!Tortoise wrote: ↑Sun Mar 22, 2020 3:12 pm If Craig were still around, I suspect he would call it "yield-chasing" to transition T-bills to bank accounts to avoid negative yield.
Safety has a cost. And in a low or zero interest rate environment, that cost might be negative yield. How is that qualitatively different than T-bill investors settling for slightly lower yield than bank accounts in a positive interest rate environment?
Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
- vnatale
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Re: Schwab cancels T bill rollovers due to negative rate fears
So, you are telling me my FIRST priorities for tomorrow (one of which I can put into motion tonight) is to fix the mistake I made last week when I attempted to move my Prime money to the Treasury but, instead, put it in Federal. That was my last move after 8 or so that day so I'm excusing myself for that. The next will be to collapse as many of my nine accounts as possible with Vanguard into as few as similar tax treatment possible so that I can pool the various Federal investments and have the necessary $50,000 to move to Treasury. It could take me three whole days of being on it to accomplish all of that as with Vanguard I think I have to do one step a day and wait for that step to be accomplished before I do the next step the next day. Unless I could get someone one the phone (gave up after 27 minutes on hold last week) who could shortcut some of these steps.Kevin K. wrote: ↑Sun Mar 22, 2020 4:07 pmFrom the PP book:sophie wrote: ↑Sun Mar 22, 2020 11:23 am The last thing I would do with T bill money is put it in a bank! Are you serious???? If we slide into a depression and banks start failing with the federal government already having spent trillions on stimulus packages, I'm not sure the FDIC guarantee is going to mean much.
I had in mind watching this page for negative T bill rates:
https://www.treasury.gov/resource-cente ... data=yield
If I spot them I'll just cancel the next rollover and move the money into a Treasury MM fund. Fidelity and Vanguard won't put those into negative interest territory. They will instead close the funds to new investors and/or set a high account minimum just like they did in 2008-2009.
"Ultimately, whether to use a CD or other bank account for the cash in a Permanent Portfolio is a decision that each investor must make for himself. In practice, many people use a hybrid approach where the bulk of their cash is in a solid and safe T-Bills [MM account] and a portion is in a bank to handle immediate expenses and emergencies."
That seems to me to be a very reasonable "both/and" approach. I also think it's pretty unrealistic to think that "full faith and credit" of the U.S. government is going to mean a whole lot if things get bad enough for FDIC and NCUA insurance to fail. If we get to that point it'll be time to head to the bunker full of MRE's, ammo and gold bullion so many Bogleheads think we PP'ers already live in.
I do think it's realistic to expect Vanguard's Treasury MM account to close again soon. I well remember that itg was closed for years right at the time the PP book came out. It's the only such fund I've found that has a low ER (.09%). Schwab's by comparison is .35%. Guess whose returns will go negative first.
Personally I'm keeping about a year's worth of cash earning ~1.30% in my excellent local credit union and the rest in STT funds divided between two brokerages. Mnuchin has already threatened to limit trading hours or perhaps even close the markets from time to time so diversification of cash makes more sense than ever IMHO.
Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
Re: Schwab cancels T bill rollovers due to negative rate fears
I'm personally selling my SHV tomorrow and letting that sit in the treasury money market instead. Not that I think SHV is less safe, it's just that I would rather keep the cash a little closer to home with the crisis. It takes 3 days to clear selling SHV before I could transfer to my bank if needed. I only have a few grand in SHV as I use it mostly to DCA between treasury bill purchases. Mainly, I'm just valuing liquidity a bit more than a couple bps at the moment.
- mathjak107
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Re: Schwab cancels T bill rollovers due to negative rate fears
I beefed up two local banks to 6 figures in each ...I will move back after the crisis ...we have it so bad here nyc
Re: Schwab cancels T bill rollovers due to negative rate fears
Take a good hard look under the hood of all of these MM accounts. Prime is the riskiest and completely inappropriate for the PP, their Federal MM fund, which is the settlement fund, has a lot of T-Bills but is far from being a pure Treasury play. VUSXX, the best of their offerings, is also not a pure Treasury fund which is why the PP book cautions against it. From Vanguard:vnatale wrote: ↑Sun Mar 22, 2020 5:23 pmSo, you are telling me my FIRST priorities for tomorrow (one of which I can put into motion tonight) is to fix the mistake I made last week when I attempted to move my Prime money to the Treasury but, instead, put it in Federal. That was my last move after 8 or so that day so I'm excusing myself for that. The next will be to collapse as many of my nine accounts as possible with Vanguard into as few as similar tax treatment possible so that I can pool the various Federal investments and have the necessary $50,000 to move to Treasury. It could take me three whole days of being on it to accomplish all of that as with Vanguard I think I have to do one step a day and wait for that step to be accomplished before I do the next step the next day. Unless I could get someone one the phone (gave up after 27 minutes on hold last week) who could shortcut some of these steps.Kevin K. wrote: ↑Sun Mar 22, 2020 4:07 pmFrom the PP book:sophie wrote: ↑Sun Mar 22, 2020 11:23 am The last thing I would do with T bill money is put it in a bank! Are you serious???? If we slide into a depression and banks start failing with the federal government already having spent trillions on stimulus packages, I'm not sure the FDIC guarantee is going to mean much.
I had in mind watching this page for negative T bill rates:
https://www.treasury.gov/resource-cente ... data=yield
If I spot them I'll just cancel the next rollover and move the money into a Treasury MM fund. Fidelity and Vanguard won't put those into negative interest territory. They will instead close the funds to new investors and/or set a high account minimum just like they did in 2008-2009.
"Ultimately, whether to use a CD or other bank account for the cash in a Permanent Portfolio is a decision that each investor must make for himself. In practice, many people use a hybrid approach where the bulk of their cash is in a solid and safe T-Bills [MM account] and a portion is in a bank to handle immediate expenses and emergencies."
That seems to me to be a very reasonable "both/and" approach. I also think it's pretty unrealistic to think that "full faith and credit" of the U.S. government is going to mean a whole lot if things get bad enough for FDIC and NCUA insurance to fail. If we get to that point it'll be time to head to the bunker full of MRE's, ammo and gold bullion so many Bogleheads think we PP'ers already live in.
I do think it's realistic to expect Vanguard's Treasury MM account to close again soon. I well remember that itg was closed for years right at the time the PP book came out. It's the only such fund I've found that has a low ER (.09%). Schwab's by comparison is .35%. Guess whose returns will go negative first.
Personally I'm keeping about a year's worth of cash earning ~1.30% in my excellent local credit union and the rest in STT funds divided between two brokerages. Mnuchin has already threatened to limit trading hours or perhaps even close the markets from time to time so diversification of cash makes more sense than ever IMHO.
Vinny
"The fund invests solely in high-quality, short-term money market securities whose interest and principal payments are backed by the full faith and credit of the U.S. government. Under normal circumstances, at least 80% of the fund’s assets will be invested in U.S. Treasury securities; the remainder of the assets may be invested in securities issued by U.S. governmental agencies."
So it's an excellent Treasury-ish MM fund overall IF keeping 50K in it at all time is no sweat for you. Otherwise you have plenty of as good or better options, assuming you have a brokerage account with Vanguard and not just mutual funds. You could buy the SHV ETF which is pure Treasury MM in its composition with super-short (less than 1 year) maturiries and a .15 ER. That's the top fund recomendation in the PP book for this asset class, followed in order by Fidelity's FDLXX, Spider's BIL and the Gabelli fund GABXX with Vanguard's VUSXX dead last because of the aforementioned inclusion of agency bonds.
You could also throw in a few 6-12 month FDIC backed CDs bought through Vanguard or held at a local bank or credit union if you're OK with some portion of your cash being held outside of Treasuries.
Others here will doubtless have more suggestions. Best of luck with your decision.
- vnatale
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Re: Schwab cancels T bill rollovers due to negative rate fears
Thanks for the quick response.Kevin K. wrote: ↑Sun Mar 22, 2020 8:06 pmTake a good hard look under the hood of all of these MM accounts. Prime is the riskiest and completely inappropriate for the PP, their Federal MM fund, which is the settlement fund, has a lot of T-Bills but is far from being a pure Treasury play. VUSXX, the best of their offerings, is also not a pure Treasury fund which is why the PP book cautions against it. From Vanguard:vnatale wrote: ↑Sun Mar 22, 2020 5:23 pmSo, you are telling me my FIRST priorities for tomorrow (one of which I can put into motion tonight) is to fix the mistake I made last week when I attempted to move my Prime money to the Treasury but, instead, put it in Federal. That was my last move after 8 or so that day so I'm excusing myself for that. The next will be to collapse as many of my nine accounts as possible with Vanguard into as few as similar tax treatment possible so that I can pool the various Federal investments and have the necessary $50,000 to move to Treasury. It could take me three whole days of being on it to accomplish all of that as with Vanguard I think I have to do one step a day and wait for that step to be accomplished before I do the next step the next day. Unless I could get someone one the phone (gave up after 27 minutes on hold last week) who could shortcut some of these steps.Kevin K. wrote: ↑Sun Mar 22, 2020 4:07 pmFrom the PP book:sophie wrote: ↑Sun Mar 22, 2020 11:23 am The last thing I would do with T bill money is put it in a bank! Are you serious???? If we slide into a depression and banks start failing with the federal government already having spent trillions on stimulus packages, I'm not sure the FDIC guarantee is going to mean much.
I had in mind watching this page for negative T bill rates:
https://www.treasury.gov/resource-cente ... data=yield
If I spot them I'll just cancel the next rollover and move the money into a Treasury MM fund. Fidelity and Vanguard won't put those into negative interest territory. They will instead close the funds to new investors and/or set a high account minimum just like they did in 2008-2009.
"Ultimately, whether to use a CD or other bank account for the cash in a Permanent Portfolio is a decision that each investor must make for himself. In practice, many people use a hybrid approach where the bulk of their cash is in a solid and safe T-Bills [MM account] and a portion is in a bank to handle immediate expenses and emergencies."
That seems to me to be a very reasonable "both/and" approach. I also think it's pretty unrealistic to think that "full faith and credit" of the U.S. government is going to mean a whole lot if things get bad enough for FDIC and NCUA insurance to fail. If we get to that point it'll be time to head to the bunker full of MRE's, ammo and gold bullion so many Bogleheads think we PP'ers already live in.
I do think it's realistic to expect Vanguard's Treasury MM account to close again soon. I well remember that itg was closed for years right at the time the PP book came out. It's the only such fund I've found that has a low ER (.09%). Schwab's by comparison is .35%. Guess whose returns will go negative first.
Personally I'm keeping about a year's worth of cash earning ~1.30% in my excellent local credit union and the rest in STT funds divided between two brokerages. Mnuchin has already threatened to limit trading hours or perhaps even close the markets from time to time so diversification of cash makes more sense than ever IMHO.
Vinny
"The fund invests solely in high-quality, short-term money market securities whose interest and principal payments are backed by the full faith and credit of the U.S. government. Under normal circumstances, at least 80% of the fund’s assets will be invested in U.S. Treasury securities; the remainder of the assets may be invested in securities issued by U.S. governmental agencies."
So it's an excellent Treasury-ish MM fund overall IF keeping 50K in it at all time is no sweat for you. Otherwise you have plenty of as good or better options, assuming you have a brokerage account with Vanguard and not just mutual funds. You could buy the SHV ETF which is pure Treasury MM in its composition with super-short (less than 1 year) maturiries and a .15 ER. That's the top fund recomendation in the PP book for this asset class, followed in order by Fidelity's FDLXX, Spider's BIL and the Gabelli fund GABXX with Vanguard's VUSXX dead last because of the aforementioned inclusion of agency bonds.
You could also throw in a few 6-12 month FDIC backed CDs bought through Vanguard or held at a local bank or credit union if you're OK with some portion of your cash being held outside of Treasuries.
Others here will doubtless have more suggestions. Best of luck with your decision.
My first priority which I actually followed up on LAST Monday was getting all money fund investments into either Federal or Treasury.
Then because I had investigated that neither fund was 100% T Bills. My next move was going to use all the money in both to buy one week T-Bills.
I all set to do that when I got slowed down for two reasons. 1) No one here seemed to believe it was an urgency to do so. 2) The government announced it was back stopping all money market funds.
I do only want to own Treasury Bills. Or, as close as possible. Keeping $50,000 in is not an issue for where I had at least $50,000. Keeping in mind that I have about 8 retirement accounts not all of them had at least $50,000 in the money market funds. I'm moving towards having all Treasuries for my cash so no CDs!
This is the topic wherein I participated and disclosed my step by step actions and questions:
viewtopic.php?f=4&t=10475
And, this one I started, questioning the purity of VUSXX:
viewtopic.php?f=4&t=10277
Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."