T-bill rates took an unexpected dive this week. Even the daily treasury yield curve, which showed a slight drop on Monday (the day before the auction) of 8 basis points for the 28-day bill didn’t foreshadow the 28-day APY’s drop from 5.39% last week to 4.95% this week. The 91- and 128-day bills also declined, though not as dramatically. Here’s the updated graph of Investment Rates for each T-bill (click to enlarge):
I pull the data for the chart each week from the official TreasuryDirect auction results page. Note again that the chart graphs APR, not APY.
I don’t have a solid explanation for why the 1-month rate dropped by so much. There’s been speculation that the Fed will cut interest rates next year, but I wouldn’t have guessed that the rate for the next month’s period would be affected as dramatically. There hasn’t been much speculation over at the Fatwallet thread on Treasuries (always a good thread to check for info and updates) on possible reasons. Anyone have other ideas on what’s going on?
I’ve been laddering my 28-day investments using the automatic reinvestment option on Treasury Direct, so about 1/4 of my total investment in 28-day T-bills will be affected by the new rate. The tax-effective yield on it is still a solid 5.65% and higher than I can get elsewhere, but obviously much lower than the 6.16% from last week.
If the trend continues, I might have to reevaluate my automatic reinvestments and determine whether getting in on the 3- and 6-month T-bills would be a better choice before the Fed makes any further comments.
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Ed
Where do you get your Treasury yields?
They range from a low at bondtalk.com to a high at the Fed. sight.
I’ve been making up my own yield simply based on the discount price of a 28-day.
I don’t really understand why there is such a variance in the listed yields for Treasuries.
Ricemutt
I wasn’t sure which treasury yield you were asking about, but for the daily treasury yield curve, I go to treas.gov (it’s the first link in the post).
For the chart, what I’m graphing is actually not the APY but the APR (or Investment Rate), which I pull each week from Treasury Direct. I’ll add a link in the post to show the source.
Thanks for providing that other site, too. I didn’t think that the Fed site might be on the high end of estimates.
Sun
It seems that the rates of all US Treasury products took a hit recently and the move coincide with the move of US dollar which is at multi-year low against Pound and 20-month low against Euro. The slide of dollar indeed has something to do with concerns of US economy slowdown and, therefore, the Fed may hold or even reduce interest rate instead of rising it.
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