Picking up Nickels

Tuesday, May 01, 2007

May 3 Issue T-Bills: 4 Week Yield (4.79%) Nosedive

Since the HSBC Direct 6% APY promotion ended yesterday and reverted to 5.05% APY, I have been keeping an eye open for a place to stash some cash. Despite the trend of declining yields, I decided to go the 28 T-Bill route again since my after tax yield would have been approximately 5.3% with last week's auction.

So I plunked down my money and purchased a 28 day T-Bill today, my first T-Bill purchase since late November. The problem with that was that the investment rate on this Bill plummeted quite a bit more than I expected, dropping to a paltry 4.683%.

Using the new and improved handy T-bill tax equivalent yield spreadsheet (courtesy of the FatWallet discussion on Treasury Bills), I ironically found out that that my tax equivalent yield for this Bill will be 5.05%. So other than showing HSBC that I was willing to move my money elsewhere for a better rate, I basically gained nothing in terms of my return on investment. Live and learn, right?

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4 Comments:

  • FNBO Direct Offering 6% APY Until 9/28

    Open an account now and have TD deposit the money once Tnote matures.

    More info:
    http://bankdeals.blogspot.com/2007/05/my-experience-opening-fnbo-directs-6.html

    By Anonymous Anonymous, at 5/2/07, 11:03 AM  

  • Thanks.

    I've been following the FNBO discussion at FatWallet, but don't know if I want to bother opening yet another high yield savings account just to get a promotional rate for 5 months. Even if I moved $25k there for that period, I would only make about an extra $100 than I would if I kept that cash at HSBC.

    By Blogger Frugal Frugalson, at 5/3/07, 8:11 AM  

  • Well, you gained something, right? The HSBC yeld was pretax, and the T-Bill yield was after tax/tax free, wasn't it?

    So that's worth a point or two.

    (This based on my admittedly very limited understanding of how T-Bills work.)

    By Anonymous Anonymous, at 5/5/07, 9:17 PM  

  • Unfortunately the 4.79% yield of the T-Bill equates to a 5.05% tax-equivalent yield for me. I basically accomplished zilch for my trouble. :)

    By Blogger Frugal Frugalson, at 5/8/07, 7:58 AM  

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