In 2019 after years of suffering from earning low-interest rates on bank accounts, a rare opportunity temporarily presented itself. A limited number of banks around the country were offering significantly higher CD rates than most local banks.
At the time, I had no way of knowing how beneficial this was, and as quickly as this opportunity arrived, it disappeared just as quickly. It appears that another potential opportunity has appeared in the form of higher interest rates for those willing to put in a little work.
The new opportunity that has presented itself has shown up in Treasury Bills and Treasury Notes. Presently, one-year Treasury Bills are yielding ~1.7%, and two-year Treasury notes are yielding ~2.5%.
These yields are changing by the second on the open market and can go away just as fast as they appeared.
It is worth noting that these rates could improve, making you regret locking in at a lower rate. Timing your purchase of these investments for the highest yield is next to impossible as there are only two types of people in this world: those who don’t know how to predict interest rates and those who don’t know they don’t know how to predict interest rates.
What I can tell you is that these rates are currently significantly better than what they have been for quite some time, and we do not know how long they will last.
How do Treasury Bills and Treasury Notes Work?
Treasury Bills have maturity dates from a few weeks to a maximum of 1 year, while Treasury notes have maturity dates from 2 years to 10 years. An investor could choose a laddered portfolio. However, the long-term rates do not appear as attractive as short-term rates at this moment in time when considering all factors.
These investments are considered safe as they are backed by the full faith of the US government. Similar to how CDs work, if you hold your investment until maturity, you will get back your entire original investment plus your guaranteed interest.
Treasuries are also liquid, meaning they can be sold in the secondary market. Depending on the current market conditions, you may get more or less than you originally invested.
Still, generally speaking, shorter-term treasuries do not fluctuate in value a great deal from one day to the next.
How Can You Purchase Treasury Bills and Treasury Notes?
Treasuries Bills and Notes can be purchased from the government’s Treasury Direct website. You can also purchase them through some banks or a brokerage account.
Discount brokerage accounts would be advised as this will minimize unnecessary expenses. For additional details regarding how to purchase Treasury Bills and Notes, read this article detailing how to buy treasury bonds.
I hope this financial information helps you with the platform to earn more on your safe money. As always, we truly appreciate your business. We try to add value to your financial life in any way, even if it does not directly impact what we are managing for you at Bernicke Wealth Management.
I hope you find this article informative. Enjoy the rest of your Spring!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
