To The Moon

Hi Tigers!

Since the launch of Treasuries products on the Tiger Trade app, many Tigers have been eager to purchase them. However, some still have questions during the purchase process. Today, I will address some frequently asked questions and tell you how to maximize the yield of Treasuries.

1.Why do orders fail? - System cancels order

Many Tigers encounter this system prompt when placing treasuries orders: "This bond order may not be able to achieve positive returns. It is recommended that you choose other bonds."

Why does this prompt appear? The reason is that the system believes your order may result in a loss.

Many Tigers might be puzzled. Aren't Treasuries "principal-protected" products with minimal risk? Why would there be a potential loss?

First, consider a simple principle: before making any investment, we primarily consider two factors: returns and costs. Only when returns > costs can the investment be profitable.

Therefore, looking at returns, the total yield of Treasuries products at maturity consists of two parts:

(1) The difference between face value and purchase price

(2) The total interest earned until maturity

(To further understand how Treasury bond yields are calculated, you can click on the "US treasuries investment courses" to learn.)

From the cost perspective, when trading Treasuries, costs may include commission fees, custody fees, and platform fees.

So, when the face value of the Treasuries you purchase is small (minimum $1,000), the maturity is short (minimum one month), and the spread is too low, it is possible to have costs > returns.

To avoid this situation, the system will automatically cancel such trades and suggest, "This bond order may not be able to achieve positive returns. It is recommended that you choose other bonds."

2.How to maximize profits in Treasuries investments?

After clarifying the above issues, you'll find that in Treasuries investment, transaction costs are crucial to your final returns. To maximize the yield of Treasuries maturity, reducing the marginal cost of transaction fees becomes a key strategy.

When trading Treasuries on the Tiger Trade app, you will generally face three main transaction fees: commission fees, custody fees and platform fees.

The current fee schedule is as follows:

• Commission (based on face value): 0.08% of the transaction face value per order.

• Custody fee (based on holding value): 0.08% of the closing holding value, multiplied by the holding days, then divided by 365.

• Platform fee (based on face value): 0.04% of the transaction face value (minimum $5, maximum $15) per order.

With the above fee schedule, we can see that commission and custody fees are charged at a fixed percentage and do not change with the investment amount. Therefore, to reduce transaction costs, consider breaking through the platform fee.

I conducted a detailed cost estimate for the purchase of 3-month Treasuries with $10,000, $100,000, and $1,000,000 as examples. The relevant costs are listed below:

(*Cost estimates are for reference only. Actual costs depend on factors such as bond price fluctuations and holding time and may not be exactly equal to the estimated values.)

From the table, you can quickly conclude that the larger the face value of the purchased Treasuries, the lower the total fee rate and annualized fee rate, bringing you more generous returns.

But don't misunderstand. We're not suggesting you buy $100,000 or $1,000,000 in Treasuries. Let's see how to maximize profits by optimizing platform fees.

According to the rate of 0.04% per order (minimum $5, maximum $15), let's do a simple calculation:

$5 / 0.04% = $12,500

$15 / 0.04% = $37,500

Did you understand the above content?

In other words, if your investment amount in Treasury bonds is less than $12,500, with a minimum platform fee of $5, the platform fee rate will be higher than 0.04%, making the investment less cost-effective.

However, if your investment amount exceeds $37,500, with a maximum platform fee of $15, the platform fee rate will be lower than 0.04%, offering a higher cost-effectiveness.

Therefore, if you plan to invest in Treasuries, don't overlook this point. If the investment amount exceeds $37,500, as the investment scale increases, the marginal cost of the platform fee gradually decreases, allowing you to maximize your yield at maturity.

In summary:

1. When purchasing Treasuries products, if the face value is small, the maturity is short, and the spread is too low, costs may exceed returns, and the system will automatically cancel your order.

2. To maximize the yield of Treasuries maturity, the investment amount in Treasuries should be greater than $37,500. On this basis, for every additional dollar invested, the platform fee rate will decrease a bit.