Comments on: Year-to-Date 4-Week T-Bill Rates and Current Online Savings Rates

By: Sun

Sun — Sat, 13 Oct 2007 04:18:04 +0000

C of I stands for Zero-Percent Certificate of Indebtedness. Basically it’s like a money holder Treasury Direct offers. When buying Treasury bills, you can either choose your external bank account as both source and destination of fund, or you can choose to use C of I. if you choose latter, then you have to transfer money from your bank account first to C of I, then the money will be drawn from it to make the purchase. Once
the bill matures, the money, principal plus interest, will be deposit in to C of I for next purchase. However, money in C of I doesn’t earn any interest. That’s why it’s not a good option to buy T-bills.

By: linda

linda — Fri, 12 Oct 2007 19:23:54 +0000

can you explain what is “C of I” in “While you can transfer money in C of I out to your MM account…”???

By: The Sun

The Sun — Thu, 15 Mar 2007 13:34:39 +0000

A Thought: Yes, we do have to be careful with the transaction limit the savings or MM account has. Last year, when I wanted to purchase more of the T-bills, I didn’t cancel the existing scheduled purchases (4 times a month), but just added 4 more purchases with the new money. Then immediately at the end of the month, HSBC sent me a letter said I was over the 6 transfer-out limit.

While you can transfer money in C of I out to your MM account, do you see any delays between the time you do the transfer and the time the money shows on your MM account? I know there’s usually 2 – 3 business days for ACH transaction to complete. If that’s the case for your MM account as well, then you lose interests when the money is on the way. Since my HSBC is almost exclusively for T-bill purchases, I use as the destination for the payment.

By: A Thought

A Thought — Thu, 15 Mar 2007 02:52:50 +0000

I’m linking a MM fund account, as that’s where I get the best interest. I’m doing a weekly ladder with 28-day T-bills, but I don’t want to go over the monthly six-transaction limit (four withdrawals, four deposits).

Instead, I going to have the redemptions and purchases use the CofI. Then I can xfer just the returns back into the linked MM account every week.

By: The Sun

The Sun — Wed, 14 Mar 2007 03:52:23 +0000

First you need to link a bank account to your Treasury Direct account to fund the purchase. At the end of the 4-week period, the money will be returned to your linked account. Since you buy T-bill at discount, the interests won’t be invested. For example, if you have $100 in your bank account and for the 4-week period you get a rate of 5% for the T-bill, then Treasury Direct will take $95 out of your account at the beginning of the 4-week period and return you $100 at the end (the numbers are just for illustration purpose) and you will have $105 in your bank account. If you want to continue the purchase and the rate is 4%, the Treasury Direct will take $96 from you and return $100. Thus, the interests you earn will be in your bank account and will never be reinvested. Therefore, though you can use whatever account you want to fund T-bill purchase, it’s a good idea to link a savings account instead of a checking account to Treasury Direct account so the interests left in the bank account will earn interests. In January, you will receive (actually it’s downloaded from your account) a 1099-INT for your investment and the form will show all your investments and interests earned from each purchase.