Happily Baffled with short term Treasuries

[SnowballCamper]

I only started using treasury direct a few months ago for some short term issues (not savings bonds). I'm amazed getting a little over 4.3% for four and six week notes (slightly better than through the brokerage) where the next best rate is much longer term. This is great while it lasts.

 

[COcheesehead]

I only started using treasury direct a few months ago for some short term issues (not savings bonds). I'm amazed getting a little over 4.3% for four and six week notes (slightly better than through the brokerage) where the next best rate is much longer term. This is great while it lasts. View attachment 55446

Why don’t you go longer and lock in better returns?

 

[SnowballCamper]

I'd have to go out to about five years or more. I guess if I was seriously chasing yield, I could do that. I'm just amazed at the yield I get for essentially holding cash with no market risk, and exceeding inflation for now.

 

[COcheesehead]

Rates can go down

 

[HFWR]

Inverted yield curve

 

[mrfeh]

Inverted yield curve

Depends on which measurement you use. The widely watched 2/10 is not inverted.

 

[aja8888]

Rates can go down

And they probably will soon.

 

[jebmke]

I'd have to go out to about five years or more. I guess if I was seriously chasing yield, I could do that. I'm just amazed at the yield I get for essentially holding cash with no market risk, and exceeding inflation for now.

Technically, we don't know if it exceeds inflation. Reported inflation numbers are historical; the yield on financial asset is forward looking. We really don't know what inflation will be going forward.

 

[HFWR]

Depends on which measurement you use. The widely watched 2/10 is not inverted.

I was confusing the rates my CU were paying, which is definitely inverted.

 

[corn18]

There is little to no reward for long term rates. My Fidelity MM account has a 7 day SEC yield of 4.12%. I just did a 5 year CD ladder and the short term yield is a bit higher than the 5 year.

But the 10-2 has not been inverted since Sep 2024.

 

[COcheesehead]

There is little to no reward for long term rates. My Fidelity MM account has a 7 day SEC yield of 4.12%. I just did a 5 year CD ladder and the short term yield is a bit higher than the 5 year.

But the 10-2 has not been inverted since Sep 2024.

The 10 year has come down dramatically. The time to lock in good yields has likely past, for now.

 

[corn18]

The 10 year has come down dramatically. The time to lock in good yields has likely past, for now.

I bought a ladder a 5 year ladder a year ago that had an average rate over 5%. That was nice. I use a 0% real return for my fixed income in my planning spreadsheet, to life is good for now.

I got out of bond funds in April of 2022, so missed the bond fund decline. Now I need to decide if/when to get back in.

 

[jebmke]

The 10 year has come down dramatically. The time to lock in good yields has likely past, for now.

if I had a 10-year liability I would look at 10Y tips, not nominal bonds. ~ 2.3-2.4% which isn't bad -- not great but not bad.

 

[COcheesehead]

if I had a 10-year liability I would look at 10Y tips, not nominal bonds. ~ 2.3-2.4% which isn't bad -- not great but not bad.

I want high income, not total return.

 

[jebmke]

I want high income, not total return.

Then a SPIA is the way to go, hands down

 

[COcheesehead]

Then a SPIA is the way to go, hands down

NO! For a whole bunch of reasons.

 

[corn18]

Then a SPIA is the way to go, hands down

A 10 year period certain SPIA is yielding 2.8%. Might keep up with inflation.

 

[53anddone]

I think its smart to stick to duration under 2 years at this point. At least an equal chance inflation is going to have a say in the bond market in the coming months.
Depends on what your state tax situation is, but I am finding I can buy individual Muni bonds of short duration that are in the 3.5% area. This is better than a treasury. You can use this handy site to figure out what you need tax free to beat taxable: Tax Equivalent Yield Calculator

 

[surprising]

My cash is parked in Ally savings getting *only* 3.6% currently. This is emergency money but also yearly property taxes on all my real estate (around $17K a year). Wondering if it's worth it to get an extra 1% going with treasuries and just use Ally to fund the property taxes (~$1500/month).

 

[maestro]

Got a short term, 3-month CD at FIDO today at 4.3% to park some cash. I'll take it.

 

[hotwired]

A 10 year period certain SPIA is yielding 2.8%. Might keep up with inflation.

That doesn't sound right. 10 year period certain vs. naked (no period certain) are usually very close in yield (only because very few people would buy a big annuity if it ended if they hit by a bus on the way out the door). But my research shows around 6-ish percent for SPIA, closer to 10% for 10 year deferred DIA.

 

[mrfeh]

My cash is parked in Ally savings getting *only* 3.6% currently. This is emergency money but also yearly property taxes on all my real estate (around $17K a year). Wondering if it's worth it to get an extra 1% going with treasuries and just use Ally to fund the property taxes (~$1500/month).

You aren't gonna get an extra 1%, but you could do better. 4 week treasuries are currently 4.3%. MM yields are 3.9%, or slightly more.

Depends on the total amount of cash you're talking about, and if you have state income taxes.

 

[Gumby]

If you don't want to have the bother of buying individual treasuries, VUSXX has a current yield of 4.23%

 

[pb4uski]

That doesn't sound right. 10 year period certain vs. naked (no period certain) are usually very close in yield (only because very few people would buy a big annuity if it ended if they hit by a bus on the way out the door). But my research shows around 6-ish percent for SPIA, closer to 10% for 10 year deferred DIA.

I think you are confusing payout rates with rates of return aka yield or IRR. You can calculate the yield of a period certain SPIA but you cannot calculate the yield of a life contingent SPIA unless you know the date of death.

 

[pb4uski]

A 10 year period certain SPIA is yielding 2.8%. Might keep up with inflation.

Nah, that's too low. I just ran one on immediate annuities.com and it was 4.49%.
$120,000, 10 years, $1,238/month starting in one month.