Going To Try US-T Bills

[BBCWatcher]

I got quite a few of USD fix deposit maturing from Sep this year, wondering what is the recommended US-T to purchase? I have IBKR account

Well, what are your plans for these U.S. dollars? To keep sitting on them as they probably lose real purchasing power?

 

[reddevil0728]

I got quite a few of USD fix deposit maturing from Sep this year, wondering what is the recommended US-T to purchase? I have IBKR account

one that aligns with your time horizon for the next move, + also taking into consideration the yield

 

[rubicon]

Nah, I’ll take the other side of this bet. The money that got squeezed out of bills during the debt ceiling imbroglio didn’t move into stocks - it moved into money market funds, and thence into commercial paper and the Fed’s reverse-repo facility.

Like, if you had money that was sitting in bills, which are a safe, boring asset, you aren’t going to move that money into stonks. That would be nonsensical.

I kinda believed the “TGA liquidity drain will wreck the stock market” thesis At first, but the more I think about it the more it doesn’t make sense.


Nah, you heard wrong. 10-20bn of incremental funding for the IRS got rescinded - they’re still getting an extra sixty billion or so this year, on top of all their existing funding.

ok if you're saying liquidity has no impact on stock market then explain why during the period of monetary expansion tech and biotech and crypto went to record highs?

 

[rubicon]

I got quite a few of USD fix deposit maturing from Sep this year, wondering what is the recommended US-T to purchase? I have IBKR account

Sep is too far out to think about now. Must look at the yield curve and your expectations on inflation and economic growth

 

[rubicon]

The $80 billion in additional IRS funding was reduced, but in the worst case it's still about $60 billion. Moreover, the IRS can still spend its additional funding as quickly as it wishes as long as the spending is within 10 years. In practice what this means is that the IRS has even more incentive to spend its still hefty additional appropriation that much faster lest some future Congress and President pull unspent funds back.

The IRS was never able to spend $80 billion before 2025. Or even $60 billion. It simply can't scale up that fast. The IRS even had trouble spending all of its extra COVID funding. You can't hire thousands of highly skilled tax auditors overnight. Major IT projects take years. And so on. So the fate of the outer years of spending was/is always subject to the results of the next election(s). If Democrats take back full control of Congress and President Biden is reelected then the IRS will get even more money. (When the IRS spends more money there's a multiplier effect. Tax collections go up more than the spending does, by a hefty multiple. That helps reduce the deficit. If you actually care about the deficit then you want a generously funded IRS. Democrats are all in favor of that equation.) If Republicans take control then they're going to rescind IRS funding and thus increase the deficit that they pretend to care about. (Newsflash: They really don't care about the deficit except as an argument when it might help them politically. And they certainly don't care about the deficit when they blow a big hole in the budget as they cut taxes for rich people.)

Anyway, at the margins this budget deal might have an impact, but the reality is the IRS still has a lot more funding to go after tax cheats. There's also the fact that nonresident alien tax cheats don't have a real political base of support. Practically everyone can agree that collecting more revenue from "foreign criminals" is wonderful stuff.

US expenditure on debt is not sustainable. It's projected to reach 3% of GDP by 2033. This is more than GDP growth so it will only get larger. Given the crowding out effect, it will be a drag on investments and growth.

 

[888888888888]

I got quite a few of USD fix deposit maturing from Sep this year, wondering what is the recommended US-T to purchase? I have IBKR account

do short bills only; don't take 1yr. depreciation. or dont convert this level; unless your investment is fully hedged anyway alr.

for some exchanges have no choice, only have to use USD.

 

[888888888888]

recall over Mar, the Fed reversed a substantial amt of QT, plus the lack of new debt will affect the bond dynamics and yields. once they withdraw the liquidity, it will put pressure on the bond mkt. altho the first few will be absorbed quite easily.
when they issue short term debt, it will force the yc inversion to widen?

 

[rubicon]

recall over Mar, the Fed reversed a substantial amt of QT, plus the lack of new debt will affect the bond dynamics and yields. once they withdraw the liquidity, it will put pressure on the bond mkt. altho the first few will be absorbed quite easily.
when they issue short term debt, it will force the yc inversion to widen?

this was a stealth injection into the banking sector...I think that might happen also which is why I bought lots of Jun 15 t bills above 6%. Let's see how the next few auctions go

 

[tchen003]

Well, what are your plans for these U.S. dollars? To keep sitting on them as they probably lose real purchasing power?

total 100k USD, gonna stay invested for the next 3 years

 

[888888888888]

for the qn i asked earlier, my answer is about three mths thereabout. just see how you think.

 

[tchen003]

one that aligns with your time horizon for the next move, + also taking into consideration the yield

total 100K USD, gonna stay invested for the next 3 years

 

[reddevil0728]

total 100K USD, gonna stay invested for the next 3 years

Purely on those “rf” assets? Not looking to go into equities?

 

[tchen003]

do short bills only; don't take 1yr. depreciation. or dont convert this level; unless your investment is fully hedged anyway alr.

why? since FED is going to stop interest hike soon, shouldn't why invest in long term securities?

 

[reddevil0728]

why? since FED is going to stop interest hike soon, shouldn't why invest in long term securities?

Cause it’s not a certainty that they will. Best be more nimble

 

[tchen003]

Purely on those “rf” assets? Not looking to go into equities?

Definitely considering... but am actually DCAing 1k USD per month into SPY via IBKR

 

[reddevil0728]

Definitely considering... but am actually DCAing 1k USD per month into SPY via IBKR

Maybe what’s better is to break up your 100k into t-bill of diff maturity

 

[BBCWatcher]

US expenditure on debt is not sustainable. It's projected to reach 3% of GDP by 2033. This is more than GDP growth so it will only get larger. Given the crowding out effect, it will be a drag on investments and growth.

Would you also like to tell us now how Japan’s public debt is “unsustainable”?

Definitely considering... but am actually DCAing 1k USD per month into SPY via IBKR

Well at that pace you’re only about 8 years 4 months away from being invested. What’s the rush?

By the way, on behalf of the U.S. Treasury I thank you for your 30% dividend withholding tax payments and future U.S. estate tax payments. Supporting U.S. civil society is quite important, and you’re helping more than most investors in Singapore. Much appreciated!

 

[Ivanka]

Hi Bbcw, does investing in IBTA or IB01 (ie uctis treasury etf) also attract 30% wht? Any advice in excess USD in broker? Thanks

 

[BBCWatcher]

Hi Bbcw, does investing in IBTA or IB01 (ie uctis treasury etf) also attract 30% wht?

Nope.

Any advice in excess USD in broker? Thanks

Some brokers pay interest on cash balances. This makes sense if you’re a day trader, for example. IMHO you shouldn’t be a day trader.

 

[reddevil0728]

Nope.

Some brokers pay interest on cash balances. This makes sense if you’re a day trader, for example. IMHO you shouldn’t be a day trader.

Why should a person not be a day trader?