Pull the Plug on T-Bill Purchases
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I have been watching the movement of 4-week T-bill rates for a while and considering making adjustment of my investment more than a month ago, but didn’t really do I felt was the right thing to do until last night when I finally canceled all the pending purchases.
The latest auction of T-bill gave investors a 4.637% APR, which is equivalent to 4.738% yield. Given the 6.37% tax rate in NJ, the taxable yield for me is about 5.09% (here’s a formula to calculate your taxable equivalent rate), slightly higher than what I am getting from HSBC, but far less than the promotion rate of FNBO Direct which pay 6.00% APY till the middle of September. Even IGoBanking’s saving account (5.30% APY) makes better choice the T-bills. Thus, it doesn’t make any sense to purchase more 4-week T-bills before any significant recovery of the yield occurs.
Because I have built a T-bill ladder with a weekly investment of $6,000, it will take four weeks for the funds to be completely moved to my HSBC savings account (the account that I designate to receive matured T-bills), which will then be transferred to FNBO Direct.
Since investing in 4-week T-bills is relatively straightforward after the initial account setup process (check out the complete process of how to invest), I can always move back in quickly once the rates become favorable again. But now, I am going to enjoy the 6.00% return from FNBO.
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I stopped my 28-day T-Bill ladder last week. You mention that your money will be going to HSBC. Why not log onto Treasury Direct and have your current T-Bills redemptions sent directly to FNBO. BTW, its too late to change this week’s redemption, but there’s plenty of time for your other three T-Bills.
Yes, right now T-bill doesn’t seem to be the best option for short term investing. The reason I use HSBC is that it’s the bank that I linked to TreasuryDirect a long time ago, when I only have HSBC and Emigrant Direct. You’re right, it would be much easier to link FNBO and TreasuryDirect to avoid the loss of interests, but I want to see what the rate will be after the promotion period. If the rate goes back to 5.24%, the pre-promotion level, then to me IGoBanking will be a better choice.