penguinise t1_jeffhsn wrote on March 31, 2023 at 4:51 PM

Treasuries usually have better rates and are exempt from state income tax, but other than the effective return you can consider them to be the same thing as CDs, so select the one with the better return.

You buy Treasury Bills at a discount to their $100 face value, and they get redeemed by the Treasury for $100 on the maturity date. If you buy them at a brokerage, you can sell them early for market price, which may or may not be attractive. In that way they are similar to CDs - you get a guaranteed return if you hold them to maturity and can cash out early for a potential small penalty.

"Laddering" as a concept applies equally to Treasuries or CDs - the idea is to have a "ladder" of them which mature at regular intervals, meaning that you more frequently have access to cash via a maturity event, so you can access the cash without having to sell a Treasury or break a CD.

maccc095 OP t1_jefvrru wrote on March 31, 2023 at 6:37 PM

Thank you!! This was very helpful

DatEngineeringKid t1_jeg6089 wrote on March 31, 2023 at 7:45 PM

If you ladder though, so be aware that T-Bills and T-Notes work slightly differently.

Bills are sold at a discount. The difference between the price you pay and the face value is the interest.

Notes are auctioned as well, but have an interest rate that is paid regularly. The yield is a combo of the discount and the interest paid. If the yield is lower than the interest rate, you will pay more than face value for the note, but will get regularly interest payments.

dust4ngel t1_jegibk8 wrote on March 31, 2023 at 9:08 PM

> "Laddering" as a concept applies equally to Treasuries or CDs ... meaning that you more frequently have access to cash

out of curiosity, why treasury ladders vs ETFs holding treasuries, such as BIL or SGOV?

BrownPrivilege123 t1_jegy2o2 wrote on March 31, 2023 at 11:02 PM

ETFs that hold bonds tend to trade at a premium or discount to the NAV of the holdings. I guess you could call it basis risk. There is also the expense ratio to contend with (effectively a managed fee), but it is less work.

I don't know what the minimum amount of capital that you need to purchase a t-bill; however, with an ETF and fractional shares, capital wouldn't be an issue

nope-absolutely-not t1_jeh2n0d wrote on March 31, 2023 at 11:37 PM

> I don't know what the minimum amount of capital that you need to purchase a t-bill

From TreasuryDirect: $100 minimum and $100 intervals.

From a brokerage: Nearly always $1000 minimums and $1000 intervals