Pull the Plug on T-Bill Purchases

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.

This article was originally written or modified on . If you enjoyed reading this post, please consider subscribing to my full RSS feed. Or you can also choose to have free daily updates delivered right to your inbox.

Author Info

This post was written by Sun You can find out more about Sun and his activities on Facebook , or follow him on Twitter .

5 Responses to “Pull the Plug on T-Bill Purchases”

  1. Michael |  Jun 18, 2007 at 1:45 pm

    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.

  2. Sun |  Jun 18, 2007 at 8:05 pm

    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.