Tbills with spare cash

[rorymac]

Hello All
Given the slight rise in interest rates it appears that buying a few TBILLS to pick up a a percent or two in yield would be a good idea.
I have done so, and in so doing have broken the reports.
I repaired it with a shameless hack and the reports are running.
The error message:

il {}
2022-08-05 15:44:07 {'type': 'reconcile_report', 'component': 'mongoIbBrokerClientIdData'}  Locked IB client ID 1
Traceback (most recent call last):
  File "run.py", line 65, in <module>
    func(*args, **kwargs)
  File "/home/rorym/pysystemtrade/sysproduction/run_reports.py", line 15, in run_reports
    price_process.run_process()
  File "/home/rorym/pysystemtrade/syscontrol/run_process.py", line 103, in run_process
    self._main_loop_over_methods()
  File "/home/rorym/pysystemtrade/syscontrol/run_process.py", line 126, in _main_loop_over_methods
    timer_class.check_and_run()
  File "/home/rorym/pysystemtrade/syscontrol/timer_functions.py", line 124, in check_and_run
    self.run_function()
  File "/home/rorym/pysystemtrade/syscontrol/timer_functions.py", line 299, in run_function
    self._function()
  File "/home/rorym/pysystemtrade/sysproduction/run_reports.py", line 45, in run_generic_report
    run_report(self.config, data=self.data)
  File "/home/rorym/pysystemtrade/sysproduction/reporting/reporting_functions.py", line 52, in run_report
    run_report_with_data_blob(report_config, data)
  File "/home/rorym/pysystemtrade/sysproduction/reporting/reporting_functions.py", line 64, in run_report_with_data_blob
    report_results = run_report_from_config(report_config = report_config,
  File "/home/rorym/pysystemtrade/sysproduction/reporting/reporting_functions.py", line 80, in run_report_from_config
    report_results = report_function(data, **report_kwargs)
  File "/home/rorym/pysystemtrade/sysproduction/reporting/reconcile_report.py", line 41, in reconcile_info
    formatted_output.append(func())
  File "/home/rorym/pysystemtrade/sysproduction/reporting/api.py", line 717, in body_text_position_breaks
    position_breaks = get_position_breaks(self.data)
  File "/home/rorym/pysystemtrade/sysproduction/reporting/data/positions.py", line 41, in get_position_breaks
    data_broker.get_list_of_breaks_between_broker_and_db_contract_positions()
  File "/home/rorym/pysystemtrade/sysproduction/data/broker.py", line 254, in get_list_of_breaks_between_broker_and_db_contract_positions
    broker_contract_positions = self.get_all_current_contract_positions()
  File "/home/rorym/pysystemtrade/sysproduction/data/broker.py", line 205, in get_all_current_contract_positions
    self.broker_contract_position_data.get_all_current_positions_as_list_with_contract_objects()
  File "/home/rorym/pysystemtrade/sysbrokers/IB/ib_contract_position_data.py", line 52, in get_all_current_positions_as_list_with_contract_objects
    all_positions = self._get_all_futures_positions_as_raw_list(
  File "/home/rorym/pysystemtrade/sysbrokers/IB/ib_contract_position_data.py", line 94, in _get_all_futures_positions_as_raw_list
    all_positions = self.ib_client.broker_get_positions(account_id=account_id)
  File "/home/rorym/pysystemtrade/sysbrokers/IB/client/ib_positions_client.py", line 16, in broker_get_positions
    dict_of_positions = from_ib_positions_to_dict(
  File "/home/rorym/pysystemtrade/sysbrokers/IB/ib_positions.py", line 56, in from_ib_positions_to_dict
    raise Exception("Can't find asset class %s in methods dict" % asset_class)
Exception: Can't find asset class BILL in methods dict

The hack in the following file: ~/pysystemtrade/sysbrokers/IB/ib_positions.py
in the function from_ib_positions_to_dict

in the position_methods_dict

    position_methods = dict(
        STK=resolve_ib_stock_position,
        FUT=resolve_ib_future_position,
        CASH=resolve_ib_cash_position,
        BILL=resolve_ib_cash_position # RM edit 
    )

Reports ran without breaking. Now to find how to do a proper fix.
As is usual an appeal to the hive mind.

[tgibson11]

Nothing wrong with this, IMO.

Rob recently merged a PR (from me) to address this issue in a slightly different way.

In the code that checks this dictionary, if nothing is found, instead of raising an exception, it now uses resolve_ib_cash_position as the default.

There are A LOT of different asset types that IB could potentially return. It would be tedious to support all of them with separate methods. The cash resolver expects only a minimum set of attributes that any financial asset would likely have. The method name could possibly be improved, but other than that, I can't think of a better way to handle it.

Of course, if you need a particular attribute of an unsupported asset class, you can always implement your own resolver for it and add it to dictionary.

[tgibson11]

Also, regarding T-bills...allow me to suggest that ETFs are probably more efficient than buying T-bills directly.

Especially for retail investors, but I even saw some research a few years suggesting that ETFs were superior even at institutional scale.

I've used VGSH in the past, but there are numerous others.

[rorymac]

Todd
Thanks for that, old habits die hard. That was my modus operandi when I did this professionally. Looking at it I assume that the reason is cost? It seems that way, about USD 5.00 to trade any size. A small concern of mine, in a rising interest rate environment are there not MTM hits on the ETF's? That said if that is true and you need to get to cash you realize those losses.
I do like the ladder effect on the TBILLS as you pretty much have a maturity every few days if you can structure it correctly.

[tgibson11]

Costs are an important factor, but also consider if it makes sense to spend your time managing a portfolio of T-bills, or if you could be doing something more valuable (or fun!), while someone who specializes in managing a portfolio of T-bills does that. Even if an ETF ends up costing a bit more (which may not be the case), it could be worth it.

You are paying a management fee to the ETF, but with their scale they can pay far lower commissions and get better executions than you would.

I don't understand what you mean regarding MTM hits. The MTM value of T-bills will fluctuate too.

[tgibson11]

Ok...think I got the MTM thing.

With T-bills, you are saying you can raise cash by letting them mature and not realizing a MTM loss. I don't think that is quite true.

If you bought in the secondary market, you paid either more or less than the when-issued price that was discounted to reflect the interest rate. So you're still realizing a gain or loss when it matures. And as far as I'm aware, the secondary market is your only option if you're not a primary dealer.

[rorymac]

MTM hits, the ETF will be managing to a different time horizon than I would ( in short their duration is probably longer ) they will have TBILLS out to perhaps a year, so with every rise in the base rate they take a hit on an MTM basis, so if you need cash on a shorter time horizon you lose / realize that MTM hit. Also the whole book has a lower yield.
They maybe managing their book that way but a glance at the daily price tells me they are not.
Generally in a rising interest rate environment one would want as short a duration on one's ladder as possible so that as you roll out to the top of your ladder on each maturity you get the higher yield.
So in my case I have bought TBILLS out to one month max on an equal nominal basis for each of the maturities, and as they mature I roll out to max one month.
Conversely in a falling IR environment you would do the opposite, because your risk is a declining reinvestment rate.
I suspect the article you read was written during the last 20 years of declining rates, and under that scenario they are correct.Those of us (cough, cough) with a sparse grey hackle traded prior to those years.

[ak2k]

If you're interested in maximizing return but minimizing interest rate duration risk, there are money market and similar funds that provide the aforementioned benefits of using a fund, but allow you to earn a yield while taking very little duration risk.

[rorymac]

Chaps
In the interest of debate and getting to a reasonable strategy on the spare cash in one's account, let me go through my reasoning and then you chaps can pick it apart, I don't necessarily think I am correct but to me at least my reasoning looks sound. Happy to be corrected.
So a cash balance at IB is paid 1.83% for USD > 10k
https://www.interactivebrokers.com/en/accounts/fees/pricing-interest-rates.php
Short duration ETF's the best (for the duration I would like) seems to be SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) is yielding 0.74% before trading costs : https://finance.yahoo.com/quote/BIL?p=BIL&.tsrc=fin-srch
( If there are better ones please let me know)
So my belief is that one should prefer to hold cash at IB
BUT
I can buy TBILLS of short duration of 3 months @ the ask 99.35128 so after costs of about $5.00 to $10.00 for the trade in 50K my price is 99.358.78 so the yield is (319/49681.06)*4 =2.59 %
So for the extra yield of 0.74 bp is the game worth the candle?
(you are spanning two FOMC meetings so that is an influence)
The shorter TBILLS yield after costs slightly higher than the IB cash yield (by slightly I mean about 0.05 to 0.10 or so ) So my contention is that by keeping your duration short ( say just before each FOMC meeting) you are indifferent to IB cash return or TBILL yield but can take advantage of rising rates, by reinvesting as interest rated go up.
Have I missed anything?