10-Year Treasury Ladder

[early-morning]

I was thinking of building a 10-year Treasury note ladder. I have $600K to invest in the fixed-income portion of my portfolio. I’d put it in an intermediate-term Treasury bond fund but with the potential for rising rates, I was thinking a ladder would be a better approach. I was thinking of buying the 10-year then selling when there were 5 years remaining. With the yield curve steepening I was thinking this would be a good point in the yield curve to sell then buy another 10-year.

But I just realized that Treasury notes pay out interest every 6 months. I then would have to take some action to re-invest it. That seems like more work than I want. I have a 5 year CD ladder going now with the interest reinvested and that works perfectly. But I was hoping to stretch out the duration especially now that the 10-year yield is rising and the yield curve is steepening.

Thoughts?

 

[twaddle]

I find it hard to get excited by the treasury yield curve:
https://www.treasury.gov/resource-c...interest-rates/pages/textview.aspx?data=yield

If you're planning to sell the bonds, they will take a hit on the secondary market just like a bond fund would if rates rise.

 

[pb4uski]

+1 I'd rather park money in 0.45% online savings accounts for a while and take my chances... about the same return as a 10 year ladder.

 

[Koolau]

I would think treasuries (right now) are NOT for the interest but for the implied safety. If you think you need all your cash to be "safe" then treasuries are probably as good as it gets. Otherwise, I'd either shop for more yield OR park it at the ridiculous low rates currently available in banks (probably on-line) which are almost as safe as treasuries. Of course, YMMV.

 

[pb4uski]

It seems not the time to lock in less than 1% in a 10-year treasury ladder when the Fed has a stated inflation target of 2%. If/when the Fed hits that target then interest rates will likely rise and the ladder will hae negative real returns.

I'd be more comfortable with a 10-year bank CD ladder (not brokered CDs) as it has less interest rate risk and and if rates rise you can reposition at a smaller cost.