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Treasury Bills???

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msa2319
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Treasury Bills???  Reply with quote  

I have about $400k from the recent sale of my home. My new home won't be ready until Nov/ Dec (possibly sooner). I am planning on purchasing 91 day T-Bills (if my house is ready sooner, I would have a minimum penalty to cash out early). Is this the best NO RISK option out there? Thanks.
Post Fri Jul 21, 2006 10:19 pm
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wyclef
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Can someone talk a little more about T-Bills compareds to bonds?
Post Tue Jul 25, 2006 2:10 pm
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BlankenshipFP
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If you're asking about treasury bills vs. treasury bonds, the primary difference is term. Bills have terms from a couple of days up to 26 weeks. Notes range from 6 months to 10 years. Bonds are 10 years and more.

Jim Blankenship, CFP�, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
Post Tue Jul 25, 2006 2:35 pm
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BlankenshipFP
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quote:
Originally posted by coaster
Also, the term is usually related to two other things: yield and price volatility. Normally, the longer the term, the higher the yield, and the more volatile the price (fluctuates more.)


Volatility is certainly a factor that increases with duration and term - and given the risk associated with that volatility and term, one would think that yield would go along with it (more risk=more return), but that's not always the case. It pays to review the interest rate environment before making an investment...

Jim Blankenship, CFP�, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
Post Tue Jul 25, 2006 3:08 pm
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BlankenshipFP
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Well, the only take I have is to hold short durations (if you're actively moving things around), and keep an eye on the rates.

Otherwise, for a long-term holder, with rising rates you'll see price erosion, but if you're in a mutual fund you'll also begin to see the higher yield bonds flowing through, which will result in more dividend income offsetting the nav erosion. If, instead, you're holding individual bonds, you'll see the same price fluctuations, but you'll still wind up with your par. Just don't lose your head and sell at the bottom!

The long term rate has been an anomoly throughout the period of fed fund rate increases - and at some point is likely to perk up. Thus the recommendation to hold short duration.

Jim Blankenship, CFP�, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
Post Tue Jul 25, 2006 9:57 pm
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