Going To Try US-T Bills

[mr_wealth]

Yup. I can key in my NRIC but cannot get pass state I lived.

 

[BBCWatcher]

Do you know if it's taxed when held by a non-US domiciled funds? E.g. IB01 and the like.
Or if it's held by invesment holding company e.g. Singapore domiciled pte ltd?

No U.S. taxability in those cases (for non-U.S. persons). Not generally anyway.

Firstrade and TD Ameritrade may also offer U.S. T-bills. Schwab definitely does if you happen to have a Schwab account. (No longer possible to open a new one from Singapore.)

If you’re not happy with the supply on the secondary market you could check whether you can place an order at original issue through your broker. Just look at the Treasury’s auction calendar to figure out what’s coming up and when.

 

[silverbomb]

the T-bills on IBKR, are they first hand (directly issued) or 2nd hand (secondary market)? how to tell them apart assumingly if they're both on the platform?

 

[reddevil0728]

the T-bills on IBKR, are they first hand (directly issued) or 2nd hand (secondary market)? how to tell them apart assumingly if they're both on the platform?

Secondary.

cant buy at auction

 

[milkfish]

I'm still figuring out as in IBKR there are bills, bonds, strips bills, bills with coupons, etc. Quite overwhelming for newcomers

 

[BBCWatcher]

the T-bills on IBKR, are they first hand (directly issued) or 2nd hand (secondary market)? how to tell them apart assumingly if they're both on the platform?

I really couldn't say, but the basic way you should work with these U.S. Treasuries is to find the CUSIP(s) of the particular issue(s) that you're interested in and go from there. The CUSIP is a bit like a ticker symbol for these purposes. The U.S. Treasury publishes the CUSIPs when they announce their auctions.

 

[RedsYWNA]

I'm still figuring out as in IBKR there are bills, bonds, strips bills, bills with coupons, etc. Quite overwhelming for newcomers

Just filter for bills lah, if you want to keep things simple......

 

[reddevil0728]

I'm still figuring out as in IBKR there are bills, bonds, strips bills, bills with coupons, etc. Quite overwhelming for newcomers

Actually that’s not a IBKR thing but a U.S. treasury thing.

to figure should understand externally first

 

[BBCWatcher]

A Brief Retail Investor Guide to U.S. Treasuries

All U.S. Treasuries listed below are available in US$100 increments. (U.S. Savings Bonds are available in smaller increments.) My understanding is that all of these U.S. Treasuries and U.S. Savings Bonds are completely U.S. tax free when they're held as individual issues (not within a U.S. fund "wrapper") by a non-U.S. person who is not engaged in a U.S. trade or U.S. business. That is, ordinary residents of Singapore who are not U.S. persons should be able to buy and hold individual U.S. Treasuries without any U.S. tax consequences.

Each U.S. Treasury that's issued has a unique identifier known as a CUSIP. Use the CUSIP if you're looking for a particular bill, note, bond, or TIPS at your broker. The U.S. Treasury announces auctions on its Web site if you'd like to monitor auction dates to try to buy a particular issue at original auction. At the same site you can find another link to the U.S. Treasury's tentative schedule of auctions. The tentative schedule will not have CUSIPs listed.

U.S. Treasuries and U.S. Savings Bonds are the world's #1 safest parking vehicles for U.S. dollars. They are general debt obligations of the U.S. federal government, backed by its full faith and credit. All these obligations are in nominal U.S. dollar terms except for TIPS and Series I Savings Bonds which are real return (a.k.a. inflation-indexed) bonds. TIPS and Series I Savings Bonds assure particular financial outcomes that are grounded in the real domestic U.S. consumer purchasing power of the U.S. dollar.

U.S. Treasury Bills

Available in 4, 8, 13, 26, and 52 week tenors. They're very simple: pay $X, get face value at maturity. (For example: pay $99, get $100 later.) No coupons.

U.S. Treasury Notes

Available in 2, 3, 5, 7, and 10 year tenors. Interest paid every 6 months.

U.S. Treasury Bonds

Available in 20 and 30 year tenors. Interest paid every 6 months. (Yes, the Treasury Bonds and Treasury Notes are the same except for the different tenors available.)

U.S. Treasury Inflation Protected Securities (TIPS)

Available in 5, 10, and 30 year tenors. The principal is periodically adjusted up or down based on the U.S. Consumer Price Index's movements. If the CPI is lower at maturity compared to the issue date then you're guaranteed face value (defense against deflation). Pays fixed interest every 6 months, and the interest is computed based on the inflation-adjusted principal.

U.S. Floating Rate Notes (FRNs)

Available in a 2 year tenor only. Pays variable interest quarterly based on the 13 week T-bill rate.

U.S. Savings Bonds

Available in Series EE (traditional) and Series I (inflation-adjusted) variants. U.S. Savings Bonds are at least difficult for international (non-U.S.) investors to buy, and you cannot buy much of them per year. For example, Series I purchases are limited to US$10,000 per year per person. You usually need a TreasuryDirect account to buy them. Most residents of Singapore can ignore U.S. Savings Bonds.

 

[CrashWire]

You usually need a TreasuryDirect account to buy them. Most residents of Singapore can ignore U.S. Savings Bonds.

Thanks for writing the above!

I just looked at TreasuryDirect, and you're right that most of us can ignore anything sold there. In addition to requiring a Social Security Number, this is the declaration that's required to create an account:

Taxpayer Identification Number Certification

By checking this box I certify, under penalty of perjury, that:

1. The number shown on this form is my correct taxpayer identification number.
2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of failure to report all interest and dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding.
3. I am a U.S. person as defined by the IRS.

 

[BBCWatcher]

There’s a “backdoor” way to purchase up to US$5,000 per year of Series I U.S. Savings Bonds, and it works like this:

1. Figure out how to “engineer” a tax refund from the U.S. Internal Revenue Service. The typical way to do this is to overpay estimated U.S. income tax via IRS Form 1040-ES. (IMHO there has to be some colorable, reasonable argument why you thought you might owe U.S. tax.) You’ll need at least an ITIN to do this, and getting an ITIN requires some reasonable justification for needing one.

2. When you file a U.S. tax return to claw back money from the IRS you would use IRS Form 8888 to divert your tax refund to the purchase of a Series I U.S. Savings Bond.

As far as I can tell you don’t need U.S. personhood, a U.S. Social Security Number, or a TreasuryDirect account to buy Series I U.S. Savings Bonds this way. You’ll get the bond mailed to you as a good old fashioned paper bond.

To redeem it you have a couple choices:

A. If in the future you can get a TreasuryDirect account then that’ll work. You can “deposit” the paper bond to convert it to electronic form. Then you can redeem it via TreasuryDirect with the proceeds going to your U.S. bank or U.S. credit union account.

B. You can take the paper bond to a U.S. bank or U.S. credit union to redeem it. Most will do that, perhaps after a bit of “Huh, you want to do what?” negotiation. Best if that’s in person, but possibly they’ll do it via postal mail.

If you lose the paper bond that’s not a calamity. There’s a straightforward process to replace it, and I don’t think there’s any fee to do that. Make sure survivors know you have this bond (and its details) — you can scan a copy of it — and keep it in a reasonably safe place.

The downside to the Form 8888 method is that you lose some interest while the IRS is holding your cash. The 4th quarter estimated tax is due January 15, and the IRS doesn’t start accepting tax returns and processing refunds until February 15 I think. Realistically you’re going to lose at least 2 months of interest. Also, it’s really rather difficult to pull off. For someone like me (who already pays estimated tax and has a TreasuryDirect account) it’s easy — I just attach IRS Form 8888 if I want a U.S. Savings Bond — but for a random resident of Singapore it’s arcane. I mention it now for completeness.

 

[BBCWatcher]

And about opening a TreasuryDirect account… If you have U.S. personhood you can open one. You may be able to get U.S. personhood by working or studying in the U.S. even temporarily. Once you have a TreasuryDirect account you can keep it. So if you love U.S. financial products — and I can understand that — then it might be a factor in deciding whether to spend some of your working career or education in the U.S.

 

[vanessa47]

And about opening a TreasuryDirect account… If you have U.S. personhood you can open one. You may be able to get U.S. personhood by working or studying in the U.S. even temporarily. Once you have a TreasuryDirect account you can keep it. So if you love U.S. financial products — and I can understand that — then it might be a factor in deciding whether to spend some of your working career or education in the U.S.

Can i check if the coupons for Treasury notes are then taxable for Singaporeans? I read that federal taxes apply though other websites also mention interest incomes may be exempt if its a savings bank etc. Somewhat confusing. And also just to check capital gains are also not taxable? Thanks!

 

[ahnyaahnya]

How many % is 12 month US Tbills ?

 

[reddevil0728]

How many % is 12 month US Tbills ?

https://www.treasurydirect.gov/auctions/announcements-data-results/
Check this out. Select 52 weeks

 

[rubicon]

if you are already on the IB platform, why not just keep your money in cash and earn FF - 50bp? The yield on the t bill rate is the market expected path of interest rates over the life of the instrument. Then you don't worry about exit or mark to market. Of course if the Fed pivots faster than expectded you would be better off.

 

[reddevil0728]

if you are already on the IB platform, why not just keep your money in cash and earn FF - 50bp? The yield on the t bill rate is the market expected path of interest rates over the life of the instrument. Then you don't worry about exit or mark to market. Of course if the Fed pivots faster than expectded you would be better off.

Don’t have to be all or nothing

 

[homer123]

@BBCWatcher

Are you familiar with TIPS Bond or TIP ETF? Why is TIP etf has such a high yield of 7.55%? Do you know whether if the yield on cost will stay steady ? Thanks

 

[BBCWatcher]

Are you familiar with TIPS Bond or TIP ETF? Why is TIP etf has such a high yield of 7.55%? Do you know whether if the yield on cost will stay steady ?

TIPS yields are based on the U.S. Consumer Price Index, i.e. the rate of inflation. The inflation rate is somewhat elevated at the moment.

The principal of each TIPS varies as inflation varies. You can read more about how they work here.

A TIPS fund holds TIPS, but the fund ordinarily isn’t designed to mature/end. Over a long enough time horizon a TIPS fund should hold real purchasing power in U.S. dollar terms just as its underlying TIPS do. There are U.S. and non-U.S. domiciled TIPS funds with the usual considerations.

 

[pai000000]

if you are already on the IB platform, why not just keep your money in cash and earn FF - 50bp? The yield on the t bill rate is the market expected path of interest rates over the life of the instrument. Then you don't worry about exit or mark to market. Of course if the Fed pivots faster than expectded you would be better off.

You don't earn any interest for the first 10,000 USD.
Also, if your total portfolio NAV is less than 100,000 USD, you only get a prorated interest rate.

So overall, its better to buy T-bills rather than leave as cash inside IBKR, unless you really got a large cash balance and a total NAV of 100,000 USD or more.

Can calculate using this site:
https://www.interactivebrokers.com/en/accounts/fees/pricing-interest-rates.php