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
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.