Gyroscopic Investing

Having mostly bought 2- and 3- year treasury notes in the past, I haven't yet seen any instrument shorter than one year come to maturity.

Right now, I see 1-Year T-Bill yields at 1.153% (src: http://quotes.wsj.com/bond/BX/TMUBMUSD01Y )
and 1-Month bills at 0.857% (src: http://quotes.wsj.com/bond/BX/TMUBMUSD01M )

Yield curve craziness aside, you don't really get 0.857% from 1-month bills, right? Do I need to divide that by 12 to determine the true yield, and divide 26-week t-bill yields by 2, and so on? Is that how instruments shorter than a year work?

Or are those numbers above useless but for a very different reason?

I do own a 26-week bill and for that, I simply subtract cost from par value and divide by cost. (0.27%)
I just don't understand how the WSJ is getting those numbers above.

dualstow wrote: Yield curve craziness aside, you don't really get 0.857% from 1-month bills, right? Do I need to divide that by 12 to determine the true yield, and divide 26-week t-bill yields by 2, and so on? Is that how instruments shorter than a year work?

Correct. When reporting yields for periods less than a year, the standard procedure is to list the annualized rate. The return you'll actually receive for a 1-month T-Bill is the annualized rate divided by 12.

I agree that it's kinda unintuitive. I suspect they do it that way to make it easier to compare investments, as annual returns is the standard most people look for.

Many thanks, Tyler. It is indeed unintuitive, although more intuitive than the notion that I could turn 10K into 11K after a year of 4-wk tBills. :-) Glad to know that I can do *something* with those WSJ numbers, then.

Not to be nitpicky, but I think it would be more accurate to divide the "one-month" annualized yield by 13, not 12, since the bills have a four-week term.

Nitpicky is good in this case. We want precision. 52÷4
Thanks!

Holy flattening yield curve, Batman.

https://www.treasury.gov/resource-cente ... data=yield

Yes, confirm what Tyler said, the yield for all bills/bonds is reported as annual returns. i.e., you would get 0.86% interest if a) Treasury rates were frozen for a year, b) you put a fixed amount into 4 week Tbills and turned on autoroll, and c) you hold the proceeds in a zero interest rate account and totaled them up at the end of the year. If you reinvest the interest, that would give you an effective rate.

The six-month bills actually look pretty decent, don't they, Sophie.
Every time stocks go up I sigh when I think of cash, but ... I think expanding my total pp should begin with cash.
And no more messing around with 3-year notes.

You practically invented the short term treasury note ladder for deep cash! I still remember your posts on this.

Between the Fed's interest rate plans and the flattening yield curve, this seems like the time to stick with short term T bills. Out of sheer laziness (or busy-ness) I haven't moved the cash out of my online savings account like I was going to, but this latest hike in interest rates is a good motivator.

I can't take any credit for that. Adopted the idea from others (Moda?) and I've been very happy with it. I'm moving to 6- & 12-month bills for much of it this year. My calendar will remind me to reread Tyler's article every 3 months.

You need to share the links to those old rolling treasury bill posts!

Jeffreyalan wrote:You need to share the links to those old rolling treasury bill posts!

Nothing particularly earth shattering in those. There's a post from rickb that's not too old, detailing what he did.

EDIT:
viewtopic.php?f=1&t=8883&p=157845&hilit ... ar#p157845

Thanks! I have recently come into some cash and I have decided to set up a Treasury Direct account and keep it in treasury bills. So any ideas on that subject are very helpful.