The rate on the 28-day T-bill continues to increase each week, while the 91- and 182-day bills hold steady. Here’s the updated APR chart that includes today’s auction results (click to enlarge):

This is a good time to check and review tax-effective yields, using the 28-day bill as an example and California’s 9.3% tax bracket:

If you live in a state with state income tax, I’m not sure there’s another comparable savings account or CD that’s as liquid that would yield comparable rates right now, so T-bills might be a good option to check into!

If you regularly follow this site, you’ll probably recall a post I wrote last week critiquing a company called Lamont Trading Advisors, the content of which has since been taken down at the company’s request. I’d like to offer an explanation for what transpired.

I originally received a comment in one of my posts on T-bills last week that I assumed was a spam (a.k.a nuisance) comment. The comment contained no contact or other information, other than a URL link to the company. After visiting the site and considering both its content and the nature of the comment, I came to the conclusion that the company was trying to use a post that I had put time and effort into writing to attract unwary clients to a bad deal. I felt that the fees they charged were unreasonable given the other available options out there for purchasing T-bills and decided to boldly state so in a post.

Yesterday, Paul Lamont, the investment advisor and principal of the firm, contacted me and explained his side of the story. He said that the comment that was left was meant as an answer to another commenter’s question about whether someone could use Treasury Direct to purchase T-bills for an IRA account.

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This week’s 28-day T-bill rate auction was just released and stands at 5.176% APR (5.3% APY), above both the 91-day and 182-day investment rates at 5.108% (5.21% APY) and 5.153% (5.22% APY) respectively. By watching the daily yield curve last week (RSS Feed), I decided to continue investing in the 28-day bill but to hold on putting more money in the 3-month bill because I anticipated a growing spread. Below is this week’s updated chart:

Again, for Californians in the conservative 25% federal income tax and 9.3% state income tax brackets, this puts the tax-effective APY at 6.05%, which should be better than any comparable short-term cash vehicles currently out there.

I decided this week to set up recurring investments at Treasury Direct so that as soon as this 28-day T-bill matures, the money from it will automatically be rolled over into a purchase of another 28-day T-bill. Treasury Direct offers an easy way to do this by providing what’s called a zero-percent Certificate of Indebtedness (C of I). It sounds much more complicated than it is. A zero-percent C of I is nothing more than a non-interest-bearing security (really, you can just imagine it’s a savings account earning 0% interest) that’s only used as a temporary storage place for funds.

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I just added a new calculator for converting APR into APY based on monthly, quarterly, and semiannual compounding. This should make it easier to find APYs given the investment rates (APRs) of each T-bill every week. (You can also read background information on the difference between APR and APY.) Feedback or comments welcomed.

This week, I forked over more money to the guvment in the form of buying more 4-week and 3-month treasuries. The 4-week yield (APY) went up to 5.27% from 5.16%. The 3-month yield went up to 5.22% from 5.17%. Taking the California tax rate of 9.3% into account, T-bills are now effectively yielding right around 6%.

Note that the 4-week now pays more than the 3-month. Given the amount of money I’m putting in, the difference isn’t great enough to justify transferring my brokerage funds to a regular account in order to be able to use Treasury Direct, but I’ll have to keep an eye on this spread.

I’ve attached the updated chart below, showing current APRs on all three types of T-bills.

Again, if you’re interested in learning more about buying T-bills, which are especially worth considering if you live in a state with state income taxes, be sure to check out the exhaustive thread on treasuries on Fatwallet. There’s also plenty of information from Treasury Direct itself. Finally, the fine people over at the Fatwallet thread have created an rss feed for upcoming treasury auction dates and one for daily treasury yield curves that are worth subscribing to. Thanks guys!