Monday, October 23, 2006

Rolling over my 28-day T-bills from October

Since I purchased my last batch of 28-day T-bills over three weeks ago, it's almost time for them to mature and to roll the proceeds over and buy a new batch on the next weekly T-bill auction on Tuesday using the TreasuryDirect online system. All of this is happening automatically, but I am curious what interest rate I'll get since it depends of the demand at the auction. I'll know at 1:00 p.m. on Tuesday afternoon when the T-bill auction results are published.

My current T-bills were issued on Thursday, September 28, 2006 and mature this Thursday, October 26, 2006. Their investment rate (uncompounded annual yield) was a skimpy 4.62%. The interest rates on the 28-day T-bills for the three weekly auctions since then have been progressively higher at 4.68%, 4.87%, and 5.04%.

If demand is higher, I'll get a lower rate. If demand is lower, I'll get a higher rate. Last month, demand was much higher as money was flowing dramatically out of commodities, but I suspect that the flows have mostly subsided and in fact reversed as people redeploy cash. I suspect that this week's auction for the 28-day T-bill will come in between 4.85% and 5.25%.

The proceeds from my maturing T-bills will be credited to my bank checking account sometime on Thursday and the debit for the new purchase will hit shortly thereafter. At least that's what happened the last two times. The net effect will be that the accrued interest will be deposited in my bank checking account.

Since I am hoping to use my Fidelity brokerage account as a "bank" account, I need to investigate whether this will work out for TreasuryDirect. One issue is that there is a paper form that a bank officer must sign and then you have to mail it in to the U.S. Treasury. I'll have to inquire whether Fidelity is prepared to do this. Alternatively, I can continue to use my old bank account, or I can investigate buying T-bills throgh Fidelity.

-- Jack Krupansky

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