Picking up Nickels

Wednesday, November 29, 2006

Nov 30 Issue T-Bills: 4 Week Yield (5.39%) Leads the Pack

I jumped back on the bandwagon and made my latest T-Bill purchase two weeks ago. As CD rates continue to drop, T-Bills are still an attractive place to stash short term cash.

For November 30 issue T-Bills, the inverted yield curve continues as 4 week T-Bills (5.39%) topped both 3 month (5.13%) and 6 month bills (5.20%).

Using the new and improved handy T-bill tax equivalent yield spreadsheet developed by contributors to the FatWallet discussion on Treasury Bills, let's compare yields of 4 week T-Bills for states with various income tax rates: high (CA 9.3%), medium (MA 5.3%), and none (TX 0%):

APY Type CA (9.3%) MA (5.3%) TX (0%)
Unadjusted 5.393% 5.393% 5.393%
Non-Itemizers@15% 6.055% 5.751% 5.393%
Non-Itemizers@25% 6.156% 5.803% 5.393%
Non-Itemizers@28% 6.193% 5.821% 5.393%
Non-Itemizers@33% 6.262% 5.856% 5.393%
Non-Itemizers@35% 6.293% 5.856% 5.393%
Itemizers 5.946% 5.695% 5.393%

This data shows that 4 week T-Bills are an excellent place to park short term cash even for residents of states with moderate income taxes. As long as the current T-Bill rate trend continues, I will be putting the proceeds from some savings bonds and maturing T-Bills into a 4 week T-Bill in mid December.


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