Sunday, August 26, 2007

Rolling my 4-week T-bills this week

My automatic reinvestment plan with TreasuryDirect will be reinvesting my maturing 4-week T-bills this week. What interest rate I will get is anybody's guess. After seeing 13-week T-bills fetch only a mere 2.92% at the weekly auction last week, I actually considered pulling the plug on my automatic reinvestment plan. Fortunately, the 4-week T-bill auction last week gave a much better yield of 4.85%, so I don't feel so bad taking my chances this week. Besides, I got a 5.16% yield four weeks ago, so I can afford a somewhat lower yield this month and still come out fairly well compared to most money market funds. My guess is that I will get at least 4.95% since the "panic" over the "credit crunch" has now substantially subsided.

Note that T-bills are guaranteed by the full faith and credit of the U.S. govermernment. Although you can get a somewhat better yield with some money market funds and CDs, T-bills are a very good choice for people parking more than $100,000 (but less than $5 million) who otherwise would have only their first $100,000 of bank deposits protected by FDIC.

-- Jack Krupansky

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