How do you buy t-bills and ladder on Fidelity?

Submitted by Bigchip01 t3_10pk023 in personalfinance

Hello, new to t-bills.

  1. Do I need a brokerage or cash management account? or can I link the buy directly to my bank account?
  2. What day should I have cash readily available to be able to begin purchasing a t-bill?
  3. What day should I buy the t-bill?
  4. How to I do the 4/8/13 week t-bill to make sure I have cash available every month? Am I able to use auto roll functionality or do I have to do manual buying on months 1 and 2?
  5. Anything else I should know as a newb?
4

Comments

You must log in or register to comment.

FckMitch t1_j6kywrp wrote

  1. U don’t need a cash management account. U can use either.

  2. I just dump a bunch of cash in the brokerage account.

  3. Whenever u want. Look at new issues and see what is available to purchase

  4. Fidelity has auto roll - you just turn it on when u buy. What is annoying is you can’t turn it off on line - u need to call them

  5. Just make sure you buy new issues. Fidelity doesn’t present the info as nice as Vanguard - you need to look at maturity date to calc if you want to buy 4 week/8 week/13 week etc. The money uninvested is in the brokerage account receives interest.

5

Bigchip01 OP t1_j6l2gig wrote

If I need to turn the 4 week into 13 week, I’d this possible with auto roll? Or do I have to manually buy the 13 week after the 4 week matures? Then activate auto roll the ?

2

guachi01 t1_j6lcl5a wrote

No, not possible to turn a 4-week into a 13-week with auto-roll. Let the 4-week mature (it'll mature on a Tuesday) and then buy the 13-week on Thursday.

3

altmud t1_j6kz4xc wrote

  1. You need a brokerage account. The cash to purchase anything will come from the "settlement fund" (a.k.a. "Core Position") in that brokerage account, which is usually a money market fund of some sort.
  2. While logged in to Fidelity, you will go to News & Research > Fixed Income, Bonds & CDs > New Issues > Treasury. There you will see a list of what is available to buy. The money must be in your settlement fund when you hit "Trade" to buy. The "settlement date" listed in the display is when the T-bill will actually start, which will be some number of days later.
  3. When the duration you want is available.
  4. There is an "Auto roll" option for Treasuries -- I've never used it, so can't comment. Fidelity has a way to build and automatically maintain ladders, but I think that is only for CDs, not for Treasuries.
4

FckMitch t1_j6lei4o wrote

On #1 - you can buy TBills from cash management account at fidelity

3

altmud t1_j6llm30 wrote

The Fidelity Cash Management account is a type of brokerage account. What I was trying to say, in answer to OP's question, is that you cannot have the money deducted directly from your own personal bank account when you buy a T-Bill, you must have the money in your Fidelity brokerage account (whatever type of Fidelity brokerage account it might be).

3

Bigchip01 OP t1_j6ljann wrote

Would this be more advantageous to have the money sitting in cash management to get interest versus the brokerage account?

2

altmud t1_j6lmufj wrote

They're both brokerage accounts. For the "Cash Management" account, you would earn interest (currently 2.21%) on cash that is "swept" to various FDIC-insured banks, whereas for the other type of brokerage account you would earn dividends on cash in a Fidelity money market fund (probably SPAXX, currently yielding 3.95%).

You can buy T-Bills in the same manner with either type of brokerage account, so choose whichever one fits any other needs you might have.

3

Bigchip01 OP t1_j6l2afq wrote

Thank you. When I take a look right now I see 0 t-bills available? Is there a certain day they become available?

2

1hotjava t1_j6lbvaj wrote

So for like a 13-wk (3 month) bill this Thursday the next batch of bills will become available for auction that closes the following Monday.

Schedule is located here:

https://treasurydirect.gov/auctions/upcoming/

They don’t show up on Fidelity until the auction opens. Note you don’t have to bid, just enter how much you want in “face value”, then after the auction close you find out the exact cost (and thus the actual yield)

3

guachi01 t1_j6lcfyi wrote

T-bills have regular auction times (barring holidays)

4/8/13/17/26-week T-bills are auctioned every week. The announcement date for 4/8/17-week is usually Tuesday and Thursday for 13/26-week. The auction date for 17-week is Wednesday, Thursday for 4/8-week, and Monday for 13/26-week. The settlement date is a week after the announcement date (usually).

Answer to your questions:

  1. Have the money ready on the announcement date.

  2. On the announcement date. (I think it's easier to do it on the announcement date)

  3. Use auto-roll if you want to keep rebuying that specific term length.

3

Knipfty t1_j6kwmgm wrote

  1. Don't know
  2. Settlement date
  3. If buying at auction, you need to place the order prior to auction and after the announcement. The settlement will be a few days after the auction. This has some good info. Look at upcoming auctions. https://www.treasurydirect.gov/auctions/upcoming/
  4. Focus on the 13. AKA 3 month T Bill. Buy this one next week. The announcement will be on Thursday. Then in 4 weeks, repeat the process. Then in 4 weeks repeat. Now you have a 3 month T Bill Ladder.
  5. ​
    1. While you can sell them at any time in the secondar market, you are then subject to interest rate risk, so you will not make as much as you originally planned.
    2. Interest is State Income tax free. If you sell early though, the cap gains will not be.
2