What is the benefit of buying TBills in the auctions where the rate is unknown until AFTER purchase, when buying TBills on the secondary market allows you to see the percent you will get before buying? Many brokers have lists of TBills you can buy that mature at all different dates with known interest rates. What am I missing? I realize most buy them thru the initial auctions but just trying to find out why that is better than knowing the rate you are getting before purchasing. Thank you.
What is the benefit of buying TBills in the auctions where the rate is unknown until AFTER purchase?
- Thread starter David Donner
- Start date
I would think of it as buying on the bid side of the market vs paying the offer side when you purchase from a dealer/broker. During the normal Treasury auction process dealers hit the new issue market so that the auction issues price at levels where dealers are mostly likely able to make money selling them post auction in the secondary market. This process is defined as the auction concession. Never a 100% sure thing but normally works. Currently the cheapest bills on the curve are the 4 month auctions.
At auction, you basically buy at the bid, where major buyers are buying. After auction, there is not only bid/offer, but in most cases a commission added. No commissions are charged if buying at auction, via U.S. Treasury Direct.
I am mostly referring to 4-weeek, to 1-year TBills. Technically beyond 1 year are either TNotes, or Tbonds, where market movement likely to be greater, so sometimes after could find better prices.
I am mostly referring to 4-weeek, to 1-year TBills. Technically beyond 1 year are either TNotes, or Tbonds, where market movement likely to be greater, so sometimes after could find better prices.
I made a mistake by buying in an auction, rate unknown.
I've never purchased Tbills directly as I usually just bought treasury ETFs.
Advertised price on Tbills was a bit higher so I thought I would try it.
On May 16th I purchased a 30 day and 60 day Tbill from Schwab.
After purchase, the yield I received on both was 4.8% which is considerably lower than the +5.25% I could have gotten with treasury ETFs.
Won't try that again.
I made a mistake by buying in an auction, rate unknown.
I've never purchased Tbills directly as I usually just bought treasury ETFs.
Advertised price on Tbills was a bit higher so I thought I would try it.
On May 16th I purchased a 30 day and 60 day Tbill from Schwab.
After purchase, the yield I received on both was 4.8% which is considerably lower than the +5.25% I could have gotten with treasury ETFs.
Won't try that again.
probably different tenors, there is no way you will be worse than buying directly from dot gov. broker shouldn’t charge any spread for the new issues.
