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This subtopic started on the index board but is a better fit here. Below is my post thanking TroySR71 for providing a link to instructions on how to buy treasuries on third party brokerage sites, in my case Vanguard.


Thank You Troy. That link provided exact and detailed steps to take with Vanguard. I just navigated Vanguard and the description matched the website exactly. I successfully entered an order to buy a $25,000 one month bond to get a feel for the process. It settles on 02-28 and matures on 03-28. The estimated yield was 0.2% higher than the money market where my cash is currently parked. After completing this round trip, I will make a bigger buy in April.

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OK, so I completed my purchase and learned a few things I thought I would share here for any help it might provide to first time treasury buyers like myself. I called the Vanguard fixed income desk to clear up certain questions and I will include their clarifications as I go.

My order filed on 02-23, the date of the auction. I bought a four week, $25,000 T-bill and my settlement account showed a debit on 02-23-23 for $24,912.51 to pay for it. That was earlier than the settlement date. Vanguard assured me the money was still in my MM account, earning MM interest until the 02-28 settlement date.

The bond shows up now in my portfolio and is described as "25,000.0000 shares of U S TREASURY BILL 0% 03/28/23 11/29/22 at $99.65".

What's that 11/29/22 at $99.65" about? I was advised by Vanguard that the Treasury often fill orders with existing bonds even though I was ostensibly ordering a new bond to be issued at the 02-23 auction. In my case they assigned a bond originally issued in Nov 2022 that still had four weeks to mature on 03-28-23. The price I was charged was calculated to delver the yield determined by the 02-23-23 auction.

I did the math on $87.49 interest on my purchase price for 28 days and it came out to 4.594%. I looked on this website, https://www.treasurydirect.gov/auctions/announceme...
and it confirms the 4.594% for the four week note.

So the actual rate I received at auction was quite a bit lower than the 4.75% estimated yield I got when I placed the order. The current 7 day SEC yield on the MM I use as of yesterday is 4.52% so by the time the T-biil is issued next Tuesday, the MM may very well be paying more than the T-bill.

My experiment to juice the MM yield by going into T-bills so far is a big fat meh. YMMV.

Really appreciate your relaying this experience.

IP

I don't have any accounts at Vanguard but have purchased treasuries at Fidelity, TD Ameritrade and Charles Schwab over the last 18 months (heading into retirement).

Since I don't use Vanguard I don't know how things are listed.

I do know if you search for treasuries the various brokerages will list them and show a yield to maturity. They also show the minimum amount required to be purchased. This number is often quite large (easily 6 figures) to get the max yield. If you put in an order to buy less then the yield will end up being less since the price of the bond is more.

At Fidelity after you search for bonds and sort them whatever way you want (maturity maturity, yield, etc.) there is a button on the far right that says something like "order book" and when I click on that I see different ask prices depending on the quantity of bonds you are purchasing. Going down to a minimum of 1 (which is $1,000).

Maybe the original quote was for a minimum that was higher than the single bond you bought?

Usually you should see this info when you preview your order before you finally commit to the order.

I will point out some brokerages are more lenient than others in terms of when money is available to use to purchase another bond after reaching maturity date. I don't know the details but in some cases, I think Fidelity, will let you immediately use the money to buy another bond on the maturity date while other brokerages will require a day or two. I've also heard if you have an account set up for margin use, you can also immediately buy the next bond. Personally I never get into those details.

I gave up on Vanguard a long time ago. I had some terrible customer experiences when I was listed as a beneficiary on my father's accounts. So I immediately moved everything to Fidelity.

Mike,

Your experience with an execution done by Vanguard confirms the bad experiences others had with them. E.g., Ask Ormont from TMF's Macro board why he left Vanguard.

They really are the worst of all the discounters: Schwab, Fidelity, E*Trade, FirsTrade, Interactive Brokers, all of whom I have accounts with. YMMV. But I yanked my money from them years ago and would never, ever, go back.


Charlie

Mike,

Now that I've had a chance to think about your bond buying experience at Vanguard, it occurs to me there might be a couple other factors in play.

#1. How YTMs are calculated depends on what assumptions are made and which formulas are used. (E.g., a standard, 360-day year or an actual, day-count year.)

#2. You need to understand the diff between 'on-the-run' treasuries and 'off-the-run' treasuries. (If you don't, then look it up.) My bet is that Vanguard swapped in an off-run bond for your order for on on-run bond, because that way they could arb the spread, plus charge a markup up to boot.

Vanguard isn't broker. It's a bucket shop that abuses its customers. (IMHO, natch.)

Charlie

Obviously Vanguard has some quality ETFs and mutual funds and did a lot to bring down the expenses of funds. Other parts of Vanguard I never cared for and customer service is really bad. I'm someone who does most everything online and don't need hand holding so I rarely would call a broker but some things they don't always allow to be done online. In my case I hadn't had a Vanguard account in years. Previously I had a personal account but moved all of the money out of it a few years ago. And long ago a previous employer had a 401K plan there but that money was also transferred out a long time ago.

Anyhow my father had accounts there and my brother and I were 50/50 beneficiaries and I had a nightmare trying to get my share because they kept insisting on some security code I must have set up years ago. You would have thought they would have aged off the code since I closed out the accounts so long ago but they didn't. They sent me paperwork to get notified and fill out to remove the code which I did and got confirmation it was done except every time I called they refused to do anything w/o the code. After many frustrating calls, waiting for someone to pick up the line, etc. someone finally helped me but it was horrible. Every other company was much better.

I think most of Vanguard's business now is from people who opened accounts years ago and are too lazy to move them. I've found Fidelity, Schwab and TD Ameritrade (along with its acquisitions - Scottrade and ThinkOrSwim) to all be much better. I did have a ton of issues with InteractiveBrokers who seemed to make everything harder, even a change of address compared to everyone else.

YMMV
Rich

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