Schwab cancels T bill rollovers due to negative rate fears

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Kevin K.
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Schwab cancels T bill rollovers due to negative rate fears

Post by Kevin K. » Fri Mar 20, 2020 7:08 pm

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.
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dualstow
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Re: Schwab cancels T bill rollovers due to negative rate fears

Post by dualstow » Fri Mar 20, 2020 8:15 pm

Thank you!
Steve Wozniak is starting an new company called Efforce
and I thought, "This is a dangerous place"
Who should appear, but two policemen
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jhogue
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Re: Schwab cancels T bill rollovers due to negative rate fears

Post by jhogue » Fri Mar 20, 2020 10:09 pm

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.
“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!"
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sophie
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Re: Schwab cancels T bill rollovers due to negative rate fears

Post by sophie » Sat Mar 21, 2020 6:44 pm

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.
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ochotona
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Re: Schwab cancels T bill rollovers due to negative rate fears

Post by ochotona » Sat Mar 21, 2020 7:04 pm

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.
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dualstow
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Re: Schwab cancels T bill rollovers due to negative rate fears

Post by dualstow » Sat Mar 21, 2020 7:06 pm

ochotona wrote:
Sat Mar 21, 2020 7:04 pm
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.
Live Oak serves individuals?
Steve Wozniak is starting an new company called Efforce
and I thought, "This is a dangerous place"
Who should appear, but two policemen
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Tortoise
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Re: Schwab cancels T bill rollovers due to negative rate fears

Post by Tortoise » Sat Mar 21, 2020 7:06 pm

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.
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ochotona
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Re: Schwab cancels T bill rollovers due to negative rate fears

Post by ochotona » Sat Mar 21, 2020 7:07 pm

dualstow wrote:
Sat Mar 21, 2020 7:06 pm
ochotona wrote:
Sat Mar 21, 2020 7:04 pm
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.
Live Oak serves individuals?
https://www.liveoakbank.com/personal-banking/

I think Kenny Rogers got out at just the right time.
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Re: Schwab cancels T bill rollovers due to negative rate fears

Post by vnatale » Sat Mar 21, 2020 7:16 pm

Tortoise wrote:
Sat Mar 21, 2020 7:06 pm
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.
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
"I only regret that I have but one lap to give to my cats."
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ochotona
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Re: Schwab cancels T bill rollovers due to negative rate fears

Post by ochotona » Sat Mar 21, 2020 7:18 pm

Check your bank health, and split it up amongst several banks.

https://www.depositaccounts.com/banks/health.aspx
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Re: Schwab cancels T bill rollovers due to negative rate fears

Post by ppnewbie » Sat Mar 21, 2020 8:10 pm

I think I bonds at treasury direct are still at 2.22 percent. You can purchase 10k per family member.
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Re: Schwab cancels T bill rollovers due to negative rate fears

Post by sophie » 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.
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