Can T-bills trade at a premium?
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Can T-bills trade at a premium?
Right now my 5/12/2020 maturity T-Bills are trading at 99.999, so going over 100 doesn't seem unlikely.
Re: Can T-bills trade at a premium?
Theoretically can they or likely will they as of right now? Yes to the former (imagine buying a 6-month, 9-month, or 1 year bill in August or September of 1981; within a few months as rates fall from almost 17 percent to around 11.9 or 12 percent and your 1 year Treasury is now a 6 or 7 months left until maturity Treasury and it is yielding 5+ percent more than currently issued six months Treasuries; I'd imagine it'd have to trade at a slight premium if the market was efficient, unregulated as far as rate caps/floors go, deep, and liquid--which was indeed the case for the T-bill market in the early 80s.). "Not very likely" to the latter; I think rates would have to fall several points--i..e negative rates on short-term Treasury paper--before you'd see a premium on T-bills...and even then 90-day bills and less would likely trade at little or no premium anyway since they are so close to maturity.
EDIT: Yes, I am aware T-bills are discount securities (essentially zero coupon bonds) but the above effect would still be the same...by "yielding" I meant yield to maturity and not paid-out-as-interest yield.
EDIT: Yes, I am aware T-bills are discount securities (essentially zero coupon bonds) but the above effect would still be the same...by "yielding" I meant yield to maturity and not paid-out-as-interest yield.
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Re: Can T-bills trade at a premium?
This is different because a t-bill trading above par means that you are guaranteed to lose money in nominal terms if you buy it.D1984 wrote: ↑Mon Mar 23, 2020 9:56 am Theoretically can they or likely will they as of right now? Yes to the former (imagine buying a 6-month, 9-month, or 1 year bill in August or September of 1981; within a few months as rates fall from almost 17 percent to around 11.9 or 12 percent and your 1 year Treasury is now a 6 or 7 months left until maturity Treasury and it is yielding 5+ percent more than currently issued six months Treasuries; I'd imagine it'd have to trade at a slight premium if the market was efficient, unregulated as far as rate caps/floors go, deep, and liquid--which was indeed the case for the T-bill market in the early 80s.). "Not very likely" to the latter; I think rates would have to fall several points--i..e negative rates on short-term Treasury paper--before you'd see a premium on T-bills...and even then 90-day bills and less would likely trade at little or no premium anyway since they are so close to maturity.
EDIT: Yes, I am aware T-bills are discount securities (essentially zero coupon bonds) but the above effect would still be the same...by "yielding" I meant yield to maturity and not paid-out-as-interest yield.
It should be interesting to see what happens to the auto-roll feature at Fidelity if t-bills are trading above par.
I saw that Schwab already canceled auto-roll in preparation for this possibility.
Re: Can T-bills trade at a premium?
Oops...my bad. Sorry about that. I was thinking in terms of "premium above what you originally paid for it when you bought it" rather than "premium to par". That's what I get for posting after about three hours sleep last night LOL.Libertarian666 wrote: ↑Mon Mar 23, 2020 10:06 amThis is different because a t-bill trading above par means that you are guaranteed to lose money in nominal terms if you buy it.D1984 wrote: ↑Mon Mar 23, 2020 9:56 am Theoretically can they or likely will they as of right now? Yes to the former (imagine buying a 6-month, 9-month, or 1 year bill in August or September of 1981; within a few months as rates fall from almost 17 percent to around 11.9 or 12 percent and your 1 year Treasury is now a 6 or 7 months left until maturity Treasury and it is yielding 5+ percent more than currently issued six months Treasuries; I'd imagine it'd have to trade at a slight premium if the market was efficient, unregulated as far as rate caps/floors go, deep, and liquid--which was indeed the case for the T-bill market in the early 80s.). "Not very likely" to the latter; I think rates would have to fall several points--i..e negative rates on short-term Treasury paper--before you'd see a premium on T-bills...and even then 90-day bills and less would likely trade at little or no premium anyway since they are so close to maturity.
EDIT: Yes, I am aware T-bills are discount securities (essentially zero coupon bonds) but the above effect would still be the same...by "yielding" I meant yield to maturity and not paid-out-as-interest yield.
It should be interesting to see what happens to the auto-roll feature at Fidelity if t-bills are trading above par.
I saw that Schwab already canceled auto-roll in preparation for this possibility.
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Re: Can T-bills trade at a premium?
Sure, no problem. I'm sure that's pretty common these days.D1984 wrote: ↑Mon Mar 23, 2020 10:16 amOops...my bad. Sorry about that. I was thinking in terms of "premium above what you originally paid for it when you bought it" rather than "premium to par". That's what I get for posting after about three hours sleep last night LOL.Libertarian666 wrote: ↑Mon Mar 23, 2020 10:06 amThis is different because a t-bill trading above par means that you are guaranteed to lose money in nominal terms if you buy it.D1984 wrote: ↑Mon Mar 23, 2020 9:56 am Theoretically can they or likely will they as of right now? Yes to the former (imagine buying a 6-month, 9-month, or 1 year bill in August or September of 1981; within a few months as rates fall from almost 17 percent to around 11.9 or 12 percent and your 1 year Treasury is now a 6 or 7 months left until maturity Treasury and it is yielding 5+ percent more than currently issued six months Treasuries; I'd imagine it'd have to trade at a slight premium if the market was efficient, unregulated as far as rate caps/floors go, deep, and liquid--which was indeed the case for the T-bill market in the early 80s.). "Not very likely" to the latter; I think rates would have to fall several points--i..e negative rates on short-term Treasury paper--before you'd see a premium on T-bills...and even then 90-day bills and less would likely trade at little or no premium anyway since they are so close to maturity.
EDIT: Yes, I am aware T-bills are discount securities (essentially zero coupon bonds) but the above effect would still be the same...by "yielding" I meant yield to maturity and not paid-out-as-interest yield.
It should be interesting to see what happens to the auto-roll feature at Fidelity if t-bills are trading above par.
I saw that Schwab already canceled auto-roll in preparation for this possibility.
Re: Can T-bills trade at a premium?
Fidelity fixed income page shows the following:
US Treasury CUSIP # 9128285Q9, maturity 11/30/20, yield 0.313, bid 101.667, ask 101.871, yield to maturity 0.021.
Depth of book shows recent transactions (more sells than buys).
Yes, some T-bills can (and do) trade at a premium in the secondary market right now.
US Treasury CUSIP # 9128285Q9, maturity 11/30/20, yield 0.313, bid 101.667, ask 101.871, yield to maturity 0.021.
Depth of book shows recent transactions (more sells than buys).
Yes, some T-bills can (and do) trade at a premium in the secondary market 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!"
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Re: Can T-bills trade at a premium?
Yes, when I had the extended call with Vanguard brokerage person this morning he quoted me a March 26th Treasury Bill that had a negative yield.jhogue wrote: ↑Mon Mar 23, 2020 11:33 am Fidelity fixed income page shows the following:
US Treasury CUSIP # 9128285Q9, maturity 11/30/20, yield 0.313, bid 101.667, ask 101.871, yield to maturity 0.021.
Depth of book shows recent transactions (more sells than buys).
Yes, some T-bills can (and do) trade at a premium in the secondary market right now.
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."
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Re: Can T-bills trade at a premium?
All my t-bills are above par.
Re: Can T-bills trade at a premium?
Yeah I have some T-Bills expiring in April and May and both are all above par by ~10-15 cents right now as well.
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Re: Can T-bills trade at a premium?
Mine all are. Then again, so are all all of my Lake Wobegon notes.