Stupid T-Bill question...

A bond with 1 year or longer until maturity will be called a "T-bond" or a T-note." AFAIK, the treasury doesn't issue any 1 year bonds; it jumps from

Best regards, Bob

As an individual, the commission you have to pay probably over-weight any "excessive" profit you may get. For others (e.g. hedge fund etc), they can benefit by investing 1-year bond because 1-year is a magic number which may make the instrument cheaper than it should be. A simple explaination is that 1 year is the boundary of "long-dated" and "short-dated" bond investment. Thus those long dated (mutual) funds have to dump the instruments if they are due to mature in 1year (because of their investment policies) and those short-dated funds may not have made the matching purchase. So the result is 1-year bond's price may be depressed.

Perhaps it would be wise to learn the lesson of the "dogs of the dow". Whenever a strategy works, it works because there is a gap in information somewhere. Normally, the market knows everything, but every once in a while, a gap happens. The dogs strategy was a gap. It worked great when only 9 or 10 people in the USA were doing it. Then it got famous. Then, perhaps it was 1998, everyone in the country tried it. And it failed. And it has failed every since. The lesson is that once a strategy becomes well known, it gets factored into the market, and it doesn't work any more. So if you are following something that you read in a book, this might be the year that a lot of folks try it, and it will fall flat on its face. Avoid the trend of the day like these fad investing schemes.

-john-

The book is not up to date. 1 year (52 week) t-bills were offered until 27 FEB 2001. Refer to Treasury press release

Treasury debt with a term of 1 year or less is a T-bill, longer than 1 year to 10 years is a T-note and longer than 10 years is a T-bond. 1 year (52 week) t-bills were offered until 27 FEB 2001. Refer to Treasury press release

Jeremy Siegel in _Stocks for the Long Run_, (third edition, 2005) says that the dogs of the dow strategy still works, just not as well as before. I don't actually know if that is true (I'd have to look at his data again), but you're point is well taken - well published strategies tend to diminish in value. Witness, for example, the January effect.

-Will