Gyroscopic Investing

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.

Libertarian666 wrote: ↑Mon Mar 23, 2020 10:06 am

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.

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.
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.

D1984 wrote: ↑Mon Mar 23, 2020 10:16 am

Libertarian666 wrote: ↑Mon Mar 23, 2020 10:06 am

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.

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.
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.

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.

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.