Conference nyoss1::market_investing

    Well, I've obtained a little more info on this T-Bill sale.  The
    discount broker will NOT provide me with the face value of the T-Bill.
    This makes more sense.
    
    The next question is, how will I know what the T-Bill will sell for?
    The broker mentioned "Oh, maybe 99 cents on the dollar".
    How can I be sure?  Or can I?  What are the chances of it selling
    for 70 cents on the dollar?  If this is the case, I'd be better off
    taking a loan from a credit card until the T-Bill matures.
    
    Any ideas?  
    Vin

    LOOK IN BARRONS or the WSJ. It lists the current discount for all
    outstanding T bills.
    
    Dave

Monday is a treasury action and i think i'm going to get in on
it for 6 months or so.

anyways, waterhouse charges $50.00 transaction for any treasury
bill, any size, any term.  10k minimum.  are there other ways
of buying treasuries where one can avoid a trans. charge?

jc

    Call the Federal Reserve in Boston and tell them you want to
    participate in the next T-bill auction. They send you a form,
    you send it back with $10,000. They refund you the interest.
    The form has an auto-rollover feature whereby you can automatically
    get in on the next auction, and have the interest sent to you.
    
    All this presumes you're willing to take the average price.
    Surely you can bid as well, but I don't know the procedure.
    
    Of course this means you likely will have a week's delay 'cause
    of the paperwork.
    
      John

Buying Treasurys directly is rather painless.  

Call (617) 973-3800 to learn about the upcoming auctions and to request forms.

The interest is deposited directly into the bank account you specify.  There 
is a delay in the deposit only if you hadn't established an account with the
Treasury beforehand. 

For a government operation, I found this to be quite hassle-free.  Once, I
goofed on writing the check.  A pleasant woman telephoned me at work the next
morning, asked me my intent, corrected the form for me, and electronically
refunded the excess amount in my check. 

Just called and requested the tender application to buy  2-year 
treasury notes for my mother (who has her money with a full-service
brokerage). I like the idea of buying direct and avoiding brokerage fees. 
However, I  wonder if there would be any advantage in buying treasuries 
through her broker on the secondary market at a discount?  I wonder if she
would do better buying them that way since the value of existing notes 
would be less now. This of course would have to be worth her while after 
considering the brokerage fees. 

Of course, I'd rather not call her "financial consultant" at ML 
and ask what he thinks.

Diana

> However, I  wonder if there would be any advantage in buying treasuries 
> through her broker on the secondary market at a discount?  I wonder if she
> would do better buying them that way since the value of existing notes 
> would be less now. 
    
    It would NOT be worth her while.
    
    If it were worth her while then it would attract arbitrageurs who would
    buy on the secondary market and sell the primary market (say via futures).
    
    Activity such as this keeps the highly liquid U.S. treasuries markets
    fairly priced.
    
      John

Ok, thanks.  I didn't think it would be. However, I'm still a little
confused about buying/selling of treasuries in general.  Say we have
a climate where interest rates are falling.  This means that a given
treasury note you bought (directly) when interest rates were higher, 
is now worth more (or selling at a premium).  If you want to realize the 
gain by selling the note, can you sell it back to the federal reserve
bank where you bought it, or do you have to sell it through a broker 
to realize the gain?  If you do sell it through a broker, is this "selling
on the secondary market"? 

I'm confused about the terms "primary" and "secondary" markets.
Last time this broker bought her intermediate term treasuries, where
exactly did he buy them from?  Was it straight from the federal reserve
with the brokerage mark-up or from the "secondary" market?  I remember
him saying something like "it's better to buy treasuries on the 
secondary market".  What exactly did he mean - besides "better for my
commissions".?

Thanks..............

Diana

    Sorry, the Federal Reserve banks only sell you Treasurys.  If you want
    someone to buy them from you before they mature, you will have to use
    a broker.

    Selling short-term bonds to realize a capital gain is rarely a wise
    move for a retail customer. A lot of your gain will be eaten up in
    transaction costs. And any replacement bonds will be correspondingly
    more expensive.
    
    Primary dealers: There are some 30-odd big financial houses that are
    qualified as primary dealers. All the big names plus a few you and I 
    may never have heard of. These are the folks who are allowed to bid on
    Treasury note and bond auctions (Bills may be different here). Not only
    are they allowed to bid, they are REQUIRED to bid, by virtue of their
    contract with Treasury. Anybody else is forced to accept the "average
    price" result from the competitive bidders. The competitive bidders
    get a fraction of the issue and the noncompetitive bidders get the rest.
    
    Usually the competitive bidders are brokerages, and they farm out their
    chunk of bonds to their customers who committed to buy. So for example
    Smith Barney might bid $20M at 5.74%, $60M at 5.77% and $150M at 5.82%.
    Other dealers submit similar bids. Treasury takes the cheapest set of
    bids that sell all of that issue (total quantity was published a week
    before the auction).
    
    If all $230M of Smith Barney's bids are accepted, then Smith Barney
    doles out its bonds to its customers according to whatever algorithm
    they find most profitable. OK, OK, according to their allocation rules.
    All the bonds are identical, the differing interest rates would be
    reflected in discount/premium to the purchase price according to well-
    known, standardized bond pricing charts. A good customer like Glantz 
    (.-1) would likely get the 5.82% wave. He might then sell bonds on the
    secondary market, but would more likely just collect the interest.
    
    I'm sure I messed up some of the details, but that's approximately what
    goes on.
    
      John
    

    Last time I checked (>10 years ago), individuals could competitively bid
    on T-bills (using the same application as a non-competitive tender).
    
    The risk was that you either priced yourself too high and didn't get a
    bill, or you priced yourself under the resulting average.  Most of the
    time the range was narrow enough to make a competitive bid  not really
    useful.  (The big houses bought so much $$ that a fraction of a basic
    point was worth the effort to bid accurately).
    
    Rich

    As for the mechanics of buying treasuries....
    
    I sent to the Fed for the forms to buy 6 month and 2,3,5 yr treasuries.
    I fill out the form. I mail the form along with a check for 
    $10,000 in the preaddressed envelope.(does this 'open an account' for me ?)
    
    Now .....
    
    Do I get a confirmation in the mail ?
    If I buy a 6 month treasury, does it roll over into another 6 month
    when the first reaches maturity?
    
    

>    If I buy a 6 month treasury, does it roll over into another 6 month
>    when the first reaches maturity?
    
    Isn't there a place on the form to check how many times to roll over,
    with an upper limit of about 4?

    Filling out the application form completely opens a Treasury account 
    for you.  Existing account holders fill out only a small part of the form.
    
    Treasury bills require payment by cashier's check or certified
    personal check; notes or bonds may be paid by personal check.
    
    13-week bills allow 8 automatic re-investments.
    26-week bills allow 4 automatic re-investments.
    52-week bills allow 2 automatic re-investments.
    Notes and bonds cannot be rolled over automatically.
    
    You are not locked in to the automatic re-investment you circled on the
    application form; you can stop the rollovers beforehand. 

I called the number mentioned 10 or so replies back.  got the forms.  i
plan to mail in 10k on friday for monday's auction.  as long as your
order is postmarked _before_ the auction and it is received by the issue
date, you get to participate.  i think friday mail is perfect... should
make it to boston by monday.  issue is on thurs, i reckon.



now, the interest from t-bills.  is it free from state tax but fully
taxable on the fed. level?

    Yes, Treasurys are not taxable by cities or states

    RE: .15

    What was the turnaround time from the time you called to the time you
    received the forms?  I called early last week and left a voicemail with
    the required information, as instructed, and nothing has shown up so
    far.

    Response time depends on which Federal Reserve Bank you called.  Worst
    case ever for me with the Boston branch was one week; best case was two
    days.

re<<< Note 72.17 by MNATUR::LISTON "CSP-PSC/E - When you need to deliver the very best!" >>>
                    -< Turnaround time for receiving forms >-


>    RE: .15
>
>    What was the turnaround time from the time you called to the time you
>    received the forms?  I called early last week and left a voicemail with
>    the required information, as instructed, and nothing has shown up so
>    far.

i called the week between xmas and newyears and got them the weds or thurs
after new years.  not bad.  i'm gonna send off the check tomorrow or today.
3 mo treas, rolling over automatically...  

couple weeks back i successfully bought a 3-mo t-bill for 10k.  my direct
deposit routing was messed up so they sent me a check for $146 or so.  that
works out to be about 5.84%, better than the bank account.

    Well I finally got the information and sent it in last week for this 
    past Monday's buy.  I heard the yield works out to about 5.96% for the 
    buy.

    Now, would any of you have any suggested method for entering this type
    of transaction into Quicken?  The Quicken help talks about redeeming 
    T-bills but not how to set up a buy transaction.

    Thanks,
    Kevin

re <<< Note 72.21 by MNATUR::LISTON "CSP-PSC/E - When you need to deliver the very best!" >>>
                     -< Setting up T-bill buy in Quicken >-

>    Well I finally got the information and sent it in last week for this 
>    past Monday's buy.  I heard the yield works out to about 5.96% for the 
>    buy.

was that the 3-mo or 6-mo bill?  the WSJ published a rate of 5.79% for this
past monday's auction of 3-mo t-bills.

    That was for a 3-month T-bill.  The rate was 5.79% but if I understand
    this correctly (which is suspect), when you take into account the 
    discount and such the actual yield works out slightly higher.  Please
    feel free to correct any misunderstandings I have of this area.

DCU gave me a bum steer when i was filling out the form for the treas.
direct account.  they thought i could deposit the interest into the
share 10, but alas, you cannot do that.  as a result, the treas. dept
is asking me to send a new acnt form.  i need a sig. guarentee, but alas,
DCU doesn't do that!  (time to switch banking i suppose, eh?).

anyways, i got a letter saying automatic investment isn't going to 
happen unless they get the new acnt form.  well, they're not gonna
get it 'cuz i can't get a sig. guarentee.

i'm wonder -- with the feds just send me the $10k i put in there originally
or will the money behind in my treas. direct acnt?  at this poiunt, i just
want the $$

jc

re. 24

If you asked for automatic reinvestment I expect they will do so - if not they
will send you your 10K back - by check if your direct deposit routing doesn't
work - if you want to cancel your automatic reinvestment there's a form you can
fill out but you need to give them a certain amount of lead time

what do they want a signature guarantee for? changing the automatic deposit
info. ?  that's probably a security issue so some random person doesn't change
it on you and get your money

another way around it is once you get your 10K back - open up a new account with
the correct routing info. - when you fill out the form if you leave the account
number blank they open up a new account for you.

    DCU doesn't guarantee signatures, but a lot of banks do. can't you take
    the form on which you need a guaranteed signature to a bank, sign it
    there, and send it back to the Treasury?
    

re       <<< Note 72.26 by MARVA1::BUCHMAN "UNIX refugee in a VMS world" >>>
                             -< try another bank >-

>    DCU doesn't guarantee signatures, but a lot of banks do. can't you take
>    the form on which you need a guaranteed signature to a bank, sign it
>    there, and send it back to the Treasury?
    

i tried calling some banks in the area and bottom line is NO CAN DO.  the
only chance i have is going to the bank where my parents have banked for
decades and see if the mgr will guar. my sig. in my mother's presence.
pain.  this is a reason that will motivate me to bale on DCU to a real
bank.