Treasury ladder

Discussion of the Cash portion of the Permanent Portfolio

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thisisallen
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Treasury ladder

Post by thisisallen » Sat Jul 15, 2017 12:54 pm

Would a two-year treasury ladder (eight rungs, each three months apart) be considered equivalent to cash, SHY, etc for the cash portion of the PP?
To clarify: it would take two years to set up the ladder, and then every three months the proceeds of a two year treasury bond would be available.
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Kriegsspiel
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Re: Treasury ladder

Post by Kriegsspiel » Sat Jul 15, 2017 4:38 pm

2 years to set up? Why don't you buy a 1 year and a 2 year bill at the same time?

Personally, I keep it simple and only buy 1 year bills.
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dualstow
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Re: Treasury ladder

Post by dualstow » Sun Jul 16, 2017 8:45 am

Correct me if I have this wrong, but the yield on the 2-year note (at the moment, per WSJ) is 1.36 % vs 1.2 % on the 1-yr. That's 13 % more, which would be a lot if only it were an annual raise, but...if your cash component is 100K, that's only $160 more.
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jhogue
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Re: Treasury ladder

Post by jhogue » Sun Jul 16, 2017 9:44 am

dear thisisallen,

SHY is an exchange traded fund (ETF) that tracks an index of 1-3 year Treasury bills. If you exchange that with your own ladder of directly owned 2-year Treasury bills you will probably note little difference in yield, but you will be removing the small counteryparty risk that comes with using an ETF, as opposed to the direct ownership that you proposed. For PP investors, that is always “a good thing,” as Martha Stewart used to say.

I have personally found it easy to hold and manage short term Treasurys in a Fidelity brokerage account. Their website can show you how to pick your Treasury bills and set them to automatically rollover. Other investors have reported similar experiences with Vanguard or Charles Schwab.

Having said the above, your original post did not mention your plans for your most liquid cash, which should take precedence over establishing the sort of Treasury bill ladder that you described.
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thisisallen
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Re: Treasury ladder

Post by thisisallen » Sun Jul 16, 2017 10:46 am

Clarification: the ladder takes 2 yrs to "setup " - 2 yrs for ALL rungs to reach 2 yrs.

This investment would be for "secondary" cash since I feel OK with holding cash (that I would draw on first/regularly) in a high yield savings account. I appreciate the comment about keeping it simple by just buying 1 yr Treasuries.
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