If you are a client of Fidelity, they are offering 6 month US Government T-bills at 4.7%. That sounds good! Not sure how you buy them inside an IRA. Anyone know?
At this rate, high yield savings might be there soon with no strings attached. That said, why not just use an ultra-short bond fund to accomplish that? VUSB ETF has a 30-day SEC yield of 4.65%
@pizzaman I don't have a Fidelity account, but I have purchased them in an IRA at Vanguard. Here is a link to the Fidelity website that shows the fixed income offerings. https://www.fidelity.com/fixed-income-bonds/individual-bonds/overview
I have purchased a few individual treasuries but most of my fixed income is allocated to short-term bond funds. I do own VUSB which has an SEC yield of 4.45% and duration of 0.9 years so very little interest rate risk but it also has corporate bonds so you do have some credit risk. I also own VSBSX (100% treasuries) with and SEC yield of 4.38% and duration of 1.9 years so no credit risk but some additional interest risk. I am keeping my bond duration to less than about 2.5 years for now as the Fed continues to raise the feds fund rate.
Given the flat yield curve, at some point it may be good to lock in these attractive rates for a longer period of time (years not months) before the Fed pivots.
After speaking with my Fidelity representative, yes you can put US treasuries into a regular IRA. Plus you can get US treasuries from Fidelity at no cost or fees (I presume the same with the other big boys) unlike ETF's in addition to their expense ratio's. So this is what I got through Fidelity into my regular IRA:
US T-Bill at 4.73% matures on 6/29/23
US T-Note at 4.70% matures on 11/30/23
US T-Note at 4.64% matures on 4/15/24
The Feds are likely to raise the funds rate by 0.25% over their next to meetings and then likely stop raising rates. If that is indeed the case, when the 6/29/23 T-bills mature I will then get longer term notes as @golich428 suggests.
Couple of fairly recent links talking about US T-bills and CDs:
Good overview of US Treasury T-bills: https://finance.yahoo.com/news/feds-interest-rate-hikes-make-t-bills-an-attractive-safer-investment-221957707.html
Site to see what rates are coming up next: https://www.treasurydirect.gov/auctions/announcements-data-results/
Treasuries going forward:
The headwinds to lower bond yields are significant but surmountable as demand for bonds is high, especially at today's yields. Further, if one believes the economic and inflation trends of the past 30-plus years return, current yields are well above their potential lows. Only three years ago, the 10-year Treasury yield was 0.50%!
Just because one invests in a long-term bond does not mean they hold it until maturity. I envision holding long-term bonds until yields revert to pre-pandemic levels. At that point, I may sell the bonds, monetize the yield change, and reinvest the funds into another asset class or even higher-yielding corporate bonds.
So,
As the credit market grows more stringent, investors should consider high-quality, longer-term bonds.
Go long and go high—as in long duration and high quality, Schwab experts suggest.
In past cycles, as the federal funds rate peaked, intermediate-term bonds' total return tended to outperform that of short-term bonds during the subsequent 12 months. That's why adding duration might make sense now. With markets anticipating a pause in rate hikes, and as more stringent lending standards start to burden economic growth, intermediate- to long-term yields could continue to trend lower while their prices trend higher.
I just had a client couple that are both 70, wanted easy-peasy no risk consistent income for the duration. Long term treasury was the perfect solution for them, all other factors in their profile considered. We live in good times for this sort of thing, right now at least.
Yes we do 🤩. Here is a link showing up-to-date Treasury rates: https://www.cnbc.com/us-treasurys/
@hines202 Now that the national debt limit has been increased and the Feds will start very shortly buying billions of dollars worth of T-Bills, what will that do to their yields??
U.S. Treasurys as of June 5, 2023
| SYMBOL | YIELD | |
| 5.183 | ||
| 5.278 | ||
| 5.314 | ||
| 5.411 | ||
| 5.458 | ||
| 5.2 | ||
| 4.47 | ||
| 4.114 | ||
| 3.825 | ||
| 3.768 | ||
| 3.689 | ||
| 4.038 | ||
| 3.889 |
Brokered CDs (at Fidelity anyway, call protected) are very close in yield to Treasuries for the very short term. Starting at 18 months brokered CDs pull away (better yields) from treasuries: 18 months 5.20%, 2/yr 4.95%, 3/yr 4.70%, 4/yr 4.55%, 5/yr 4.45%.
The interest produced by both is taxed as ordinary income, except that Treasuries are not taxed at the state/local level, CDs are.
U.S. Treasuries as of June 26, 2023
| SYMBOL | YIELD | |
| 5.108 | ||
| 5.252 | ||
| 5.26 | ||
| 5.39 | ||
| 5.30 | ||
| 5.32 | ||
| 4.28 | ||
| 4.11 | ||
| 3.97 | ||
| 3.72 | ||
| 4.01 | ||
| 3.82 |
Where will US Treasuries go from here (from the Washington Post):
Since last fall, the 10-year Treasury yield has remained in a narrow range near its current level of 3.75%. There’s little reason for it to stay there, and many reasons to expect it to move considerably higher.
How high, then, might Treasury yields go? Let’s put together the pieces. Suppose the Fed’s short-term interest-rate target, adjusted for inflation, averages about 1% over the next decade. Inflation averages 2.5%, and the bond risk premium is one percentage point. In sum, this suggests a 10-year Treasury note yield of 4.5%. And that’s a conservative estimate: Given historical neutral short-term rates, the recent persistence of inflation and the troubling US fiscal trajectory, all three elements could easily go higher.
