Should I Buy Treasury Bonds Now? | How High Will Bond Yields Go (Weekly Treasury Update May 2024)
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- เผยแพร่เมื่อ 5 มิ.ย. 2024
- Question of the week: Should you buy Treasury bonds now? Are you foolish for going long on Treasury bond yields at 5+%, if they will meet your financial needs?
What happened to bond yields this past week? Plus, the upcoming week’s auctions & news - that's what we're covering in this week's Treasury update video!
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*Sources can be found in first pinned comment
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Our Bond Courses vs TH-cam Membership | Which Is Right For You: th-cam.com/video/H5h4Eyh0hjo/w-d-xo.html
Bond Beginners Course Sneak Peak | I-Bonds vs TIPS: th-cam.com/video/uXPzbje1g2E/w-d-xo.html
Bond Masters Course Sneak Peak | How To Build A Bond Ladder: th-cam.com/video/p90IDmXn19s/w-d-xo.html
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Here is the overview for Bond Beginners:
1. Bond Basics
What A Bond Is & How A Bond Works
Why Invest In Bonds
New Issue vs Secondary Market Bonds
Interest Rates & Bond Prices
Current Yield & Yield To Maturity
Always Remember This!
Buying At Par, Above Par & Below Par
Different Types Of Bonds
Wrap-Up
2. The Risks Of Bond Investing
Seven Key Bond Risks
Credit Risk
Interest Rate Risk
Reinvestment Risk/Call Risk
Inflation Risk
Liquidity Risk
Currency Risk & Country Risk
Bond Risk Mitigation Strategies
Wrap-Up
3. US Treasuries Overview
What Are US Treasuries
Why Invest In Treasuries
Where Can You Buy Treasuries
How Are Treasuries Taxed
Wrap-Up
4. Treasury Bills
What Are Treasury Bills (T-Bills)
When Do T-Bill Auctions Happen
Where Should You Buy At Auction
Auto-Roll When Buying At Auction
Where To Find Recent Auction Results
High Rate vs Investment Rate
Reopening Auctions
Cash Management Bills (CMBs)
Buying & Selling On Secondary Market
Wrap-Up
5. Treasury Notes & Bonds
What Are Treasury Notes & Bonds
When Do Auctions Happen
Buying Treasury Notes & Bonds
Auction High Yield vs Interest Rate
Floating Rate Notes (FRNs)
Treasury Zeros (STRIPS)
Wrap-Up
6. TIPS (Inflation-Protected)
What Are TIPS
When Do TIPS Auctions Happen
Nominal vs Real Yields
Negative Yields
How Do You Adjust TIPS For Inflation
Taxes On Phantom Income
Secondary Market Liquidity
Wrap-Up
7. I-Bonds (Inflation-Protected)
What Are I-Bonds
How Does I-Bond Interest Work
I-Bonds vs TIPS
The Annual I-Bond Limit
Wrap-Up
8. Agency Bonds
The Universe Of Bonds
What Are Agency Bonds
How Are Agency Bonds Taxed
Treasuries vs Agencies
Who Might Want To Consider Agencies
Yield-To-Call & Yield-To-Worst
Where Can You Buy Agency Bonds
Wrap-Up
9. Municipal Bonds
Our Bond Universe Gets More Complex
What Are Municipal Bonds
How Safe Are Munis
How Are Munis Taxed
The De Minimis Rule
Social Security & Medicare Premiums
Treasuries, Agencies & Munis
Who Might Want To Consider Munis
Wrap-Up
10. Corporate Bonds
Our Bond Universe Is Complete
What Are Corporate Bonds
How Safe Are Corporates
Corporate Bond Hierarchies
Five Key Features Of Corporate Bonds
How Are Corporates Taxed
Treasuries vs Corporates, Etc.
Who Might Want To Buy Corporates
Wrap-Up
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Here is the overview for Bond Masters:
1. Stocks vs Bonds
Historical Performance
Are Bonds Really Less Volatile
Why Invest In Bonds
Accumulation vs Decumulation
Allocation of Stocks vs Bonds
Wrap-Up
2. Which Bonds Might Be Right For You
Treasuries & Other Types of Bonds
Nominal vs Real Yields
Inflation vs Non-Inflation-Protected
Taxable vs Tax-Advantaged Accounts
Wrap-Up
3. Bond Ladders & Other Bond Strategies
Normal vs Inverted Yield Curve
What Is A Bond Ladder
5 Important Bond Laddering Questions
Laddering When Rates Are Rising
Laddering When Rates Are Falling
Laddering When Rates Are Uncertain
What Is A Bullet
What Is A Barbell
Wrap-Up
4. Holding to Maturity vs Selling Early
Why Hold to Maturity
When To Sell Early Before Maturity
Tax Implications Of Selling Early
Wrap-Up
5. Individual Bonds, Bond Funds, Etc.
Why Buy Individual Bonds
Why Buy Bond Funds
Bond Fund Considerations
Key Bond Fund Concepts
CDs vs Treasuries
Other High-Yield Investments
Wrap-Up
6. Our B.E.S.T. Model Portfolios By Age
Our B.E.S.T Model Portfolios By Age
Model Portfolios In The Industry
B.E.S.T Model Portfolio Difference
How Much Do You Need To Retire?
How I Use The Rules of 100, 110, & 120
B.E.S.T Model Portfolios (20s)
B.E.S.T Model Portfolios (30s & 40s)
B.E.S.T Model Portfolios (50s & 60s)
B.E.S.T Model Portfolios (70s+)
Wrap-Up
7. The Decumulation Phase
What Is The Decumulation Phase?
Bear Markets & Recessions
What Can You Do In Bad/Bear Markets
Decumulation Tax Considerations
The 4% Rule
The Bucket Strategy
The Flooring Approach
Jen’s Bucket Strategy With A Twist
Wrap-Up
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SOURCES FOR TODAY'S VIDEO:
home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics
www.treasurydirect.gov/auctions/results/
www.sca.isr.umich.edu/
treasurydirect.gov/auctions/upcoming/
www.bls.gov/schedule/news_release/cpi.htm
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Thanks for visiting our personal finance channel! We hope this content will help fast-track your financial journey! Everyone's financial journey is different. Please note that: 1) there are questions/ comments which I will not be able to answer without fully understanding your financial, personal & other circumstances & 2) we will not ask you to call us or send us money in the comments on this channel or any of our other social media accounts, so if you see comment(s) along those lines, it is most likely spam - PLEASE DO NOT ENGAGE WITH SPAMMERS OR GIVE OUT YOUR PERSONAL INFORMATION FOR YOUR OWN SAFETY.
5% with no risk is never a bad thing.
Unless inflation is higher than that (which it is)
@@RasielSuarez Only for MAGA 🤡🤡🤡
@@pensacola321 take your politics somewhere else
Politics do play a role, remember last year at this time some MAGA reps were threatening to default on the gov debt, and no one knew what would happen to treasures.
The risk is a highly indebted government inflating their debt away (and with it, the value of your dollars).
Nobody on YT does this better than Jen. Period.
I’m have been watching your videos for a while now and you really so efficient and very clear I. Your presentation thanks for your work
Thank you for this video! This is the exact question I've been pondering for a few months.
Great video. Welll prepared as always.
Thank you Jennifer for your valuable and comforting advice. Buying 30K in 6 month T-bills tomorrow.
You are so professional
Great video. So well prepared.
In my opinion, it's not foolish at all. From my point of view all we can do is make the best individual decision we can with the information we have at any given time.
Thanks!
Always excellent. Thank you.
Thanks for your sharing!
What an adorable picture! I hoped you shared with your Mom today!
We did! Markus & Alexander are grilling for me now :-)
Thank you for addressing the question of locking in rates now and if that is foolish. I did use the principles in the Bond Master course (which I highly recommend) to plot a path forward. I left 15% in a few high-quality, broad-based ETS, 42% in long-term GSE bonds (avg 5.25% non-callable), and 43% in short-term treasures and GES bonds (many of these are callable because they are short-term). Your dog bone approach was best for my journey at this time. Thanks for your high-quality content on a subject I never guessed I’d be interest in. Roger
You’re welcome Roger! I think there are quite a few folks in our community who are asking themselves the same question you asked me. And thanks for the Bond Masters recommendation - we’ll be sure to post it on our website soon! Jennifer
Mho... Laddering bonds later in life allows a certain percentage of maturing bonds cash to facilitate a move back into equities at solid entry points. Especially conglomerates that pay solid dividends for years.
Always appreciate your solid insight. ❤
That's exactly what I plan to do in a few years and avoid the worst of a market crash early in my retirement journey.
@@youtubemusic2700 And just buy the big corrections. Peace of mind is so important rather than the trying to hit the bonanza.
i am roughly 65% treasuries ( rolling along with a laddering of anywhere from 1 to 6 months) at age 72 and retired for the past 2 years. 30 % or so equities ( mainly dividends ETFs and some high quality individual companies that have comparable yields to the treasuries if not more in some cases. most of the individual companies are in Reits or energy which have been beaten up this year but are poised for a rebound if interest rates go down with a rate cut . I personally think there will be no rate cuts this year. Market overbought and i think its like 5-10% pf S&P companies responsible for like 70% of S&P gains. No one can predict what this market will do but safety comes first (treasuries) and invest only in high quality dividend paying companies with track records of riding out all types of markets.
Thanks for this - interesting to see!
Wow, you must be reading Kiplinger's.😊
Energy and REITs yielding >5%(no Utilities?), I’ve got some homework to do
@@Dividendflywheel be careful of those energy reits. some are or they own oil and gas royalty trusts and those are rife with corruption. I've owned a few over the years and almost all have gone to 0
@@Dividendflywheel What is an energy REIT? I've owned equity and mortgage REIT's for decades, but never heard of an energy REIT.
perfect analysys. Excelent video.You have to choose a portfolio that makes you sleep well at night
Thank you
I know this channel is about bonds, but with current yields, when would you advise a person close to retirement to invest in annuities? For me, the example of the video would be an option.
Little Jen may not have been excited by the CPI report, but she'd be amazed by what you're up to these days!
I continue to add to stocks that i believe have sold off unfairly or are fairly priced etc. But I have a sizeable portion of funds in T bills just letting them roll over at 5.3-5.4% and money markets like VRMFF at Vanguard also paying about 5.3%. Everytime I buy more bonds I whisper to myself that I am protecting me from myself! lol because I am always bullish and always want to buy stocks. But 5.3% steady eddy is great and allows me to have LOTS of cash SLOWLY being available to me in the event of a big selloff (I say slowly because I have been known to jump back in too quickly so its better to have these laddered over months..oh when will I learn!)
There is the idea in asset allocation of being on the efficient frontier. The area with best risk adjusted returns. Most work on that suggest it almost always in the past has been between 25% stocks/75% bonds to 30% stocks/70% bonds. Note this is not risk free nor maximum return, just one over time that has a better ratio of downturns vs returns.
That sounds more prudent than the 'get rich quick' ethic that prevails now.
It's pretty hard to determine when it's going to be a recession even top investors predicted a recession in 2023. Going to cash or bonds after a major correction in the beginning of 2023 would have been a big mistake. the market is currently at an all-time high. It is tempting 5% risk-free
Good stuff
Researching why it’s termed an auction, different types of auctions, we believe, as opposed to a purchase? ✅
Love the pic of you as a little girl. You still have the same great smile! :)
The only downside is opportunity cost. But, the higher the rate, the less likely it will be a problem.
Can't wait until Wednesday!
What is Wed ?
@@no1dweeze CPI announced.
I wish they would have T-Bill offerings between 26 and 52 weeks. Would be nice to defer interest accrual to next year but I don't want to go all the way out to 52 weeks.
Buy them on the secondary market through a no cost online brokerage firm.
little Jen is soooooo cute😘😘😘
Jen always enjoy and benefit from your videos. My dilemma is what the government is doing with spending and the debt. Adding $1 Trillion in debt every 100 days is pretty scary to me. So I am very hesitant to buy any long term bonds. Not sure that we may have a default somewhere in the next 10 years that I can't bring myself to purchase these bonds. If that would happen it would devastate many bond holders. Any thoughts on this? Thanks
Stay tuned! Jennifer is working on some great videos on this topic - it should be out sometime this month (if all goes as planned). Eva
It’s hard to do when stocks only seem to go up. Straight up.
Until they comes straight down...
so put some in stocks and some in bonds as your age and risk dictate. Just look at stock returns in 2008 or 2022 . Downturns happen, what's your risk tolerance.
There’s this thing called gravity that ALWAYS happens. Trust me, it will.
Warren Buffet said in the recent Birkshire Hathaway meeting “stocks have been picked over” meaning there is nothing to buy at this time. Stay in t-bill etf for now.
That's the most ridiculous thing I've ever heard
Took me a while to build my ladder. I sleep well.
I see Recession coming and treasury notes and bonds will definitely be much safer. The general population is holding way too much debt Along with our government.
Also though a couple more bouts of runaway inflation will most likely take place just like the 70s. They printed 40% of the M1 money supply in one year and one year of inflation going from 2% up to 9% and back down to 3% in a year and a half is not enough price expansion for that type of money supply inflation. They will have to raise rates again.
@@_JimmyBeGood Good for me if rates go up.
I’m retired and 70, most of my portfolio is now in shorter term treasuries. I would love to go to 5 year and lock in a good rate for a longer time. That being said I remember last year at this time some congregational house reps were threatening to default on the gov debt, and no one knew what would happen to treasures. Their was uncertainty and paranoia floating around. No one knew for sure how that would play out. That’s the only thing that gives me pause. I’m sure I would get my money back, but would it be the full investment amount.
The US has never defaulted on Treasuries. In fact, many countries hold US Treasuries to bolster their own currency. Bottom line, if the US were to ever default, we would have much more significant global problems to worry about. We would bring the rest of the world down with us in a type of catastrophic scenario worse than the global 1929 depression. So don't believe the hype. US Treasuries are about the most secure investment you can make.
Are you locking in this rate?
I think 2 yr can go to 6%
I think MYGAs are a better bet as you could ladder them and not have to pay taxes on the income until you take it out. Just saying.
3rd auction in a row of 13wk tbills tomorrow!
Good luck!
What bond investors are afraid of is . . . . . will the huge deficit take up so much future capital that it forces long-term rates even higher to draw the capital to them.
i'm not seeing the yields at Treasury Direct auctions report for the May 10 line shown in her report (4 & 8 week bills are nowhere near the rates shown.)
Agreed. I wish I could get the rates shown in the video!
any ideawht Fidelity has raise the minimums for tbills (100 was the lowest i could find)?
Did you check when market was open or closed? Try Schwab instead.
Can one take the interest monthly out of bonds or t-bills to live on?
T-Notes and T-Bonds pay interest every six months into your bank account.
@@hkraytai thanks!
at 6:00....I don't understand why the graphic shows 5.51% yield on the one month T-Bill. I see that the BANK DISCOUNT has consistently been at 5.27/5.28% and COUPON EQUIVALENT at 5.37/5.38%.
Thank you Karl
@@DiamondNestEgg OK, that explains it. So I guess my next question now is how do I compare these annualized yields with money market yields? VUSXX
Vanguard Treasury Money Market Fund, for example, has 5.27% Average 7-day SEC yield--is that equivalent to the 5.51% figure? No sense in buying 4-wk T-Bills when money markets pay the same or more, right?
Your table at 6:00 shows the 5/10/24 4 Month T-Bill rate of 5.51. I bought that and it's 5.406. What am I doing wrong when viewing this?
These are secondary market prices: home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202405
So is the bond yield going up next week? or no?
Ask God
Jennifer, I would love to know why inflation goes higher when expectations go up. Doesn’t make sense. Thank you!
Because there is less consumer resistance to rising prices. Consumers thinking, "better buy it now, because it will just be more expensive tomorrow" becomes a self-fulfilling positive feedback loop which stimulates more inflation.
This bear bond market could decades to 2021 high.
My portfolio for the past 30 years has always been self managed and I own 3 shares of RPC WEALTH IAF Berkshire Hathaway Class A stock (BRK:A) which I bought in at about $17,000 during the mid 90s, I’m currently liquidating some of these positions to incorporate new Gen. Stocks, but am I better off re-investing into Gold as it seems stocks are a little too unstable right now.
Thanks for the video.
Looking at the calendar, the 43 day treasury bill falls on the 4th of July. My hypothesis, this is a rare 43 vs 42 day treasury due to the holiday.
The auction date for the 43-day CMB is May 21st (not July 4th) , but you may be right that there will be only one 43 day CMB that May week - we'll find out soon enough!
@@DiamondNestEgg S/he meant the maturity date for the 43-day CMB falls on July 5th, if they had made it a 42-day it would have fell on the holiday.
@@DiamondNestEgg - the auction is in May, but the payout would fall on July 4, which is a holiday. I believe that is why the is treasury bill is 43 days, so payout is after the holiday.
Is the 43 day CMB a reopening of an older one? I do remember substantially longer CMBs being offered last year.
Hi! We can't tell yet - will need to wait for it to be announced later this week. Eva
Yes!
One also has to take into consideration if Biden is reelected his plan to tax capital gains at over 40percent and how this will effect your return on a 5percent basis. Keep in mind the inflation problem. Rates should be higher if you project the Biden tax plan for capital gains
Not seeing 5+% on anything >2 years (includes call date on LT agencies) - is that the proposal being discussed? Would seem that train already left the station last October.
I just posted a follow-up in the member zone with what I found this AM & some comments.
@@DiamondNestEgg Thank you for the quick feedback! Took a look and will need to research how de minimis is applied to TVA bonds and comment there if needed. Seems like a "lock-in" yield for a new LT ladder across a broader range of "safe" options at this moment would be more like 4.7% - still something to seriously consider for all the reasons you stated in the video.
You're welcome - we're trying to catch up on all the missed comments, etc over the past few months & you've caught us on our catch-up days :-) So back to the topic at hand - if you mean the De Minimis rule - that applies to munis specifically (not agencies like TVA). If you mean capital gains tax - that's another matter - that does apply to agency bonds. If you are in Bond Masters, we go through capital gains tax in Module 4 I believe. Also, I will add the laddering video to our list.
CD's
I would like in 8%
Who wouldn't? I'm sure you can find some junk bonds that pay that rate on the secondary market.
Fyi. Bonds are currently NOT at 5% or more. However, T-BILLS are.
GSAs & IG corporates are
@volvobeliever2427 investment grade?
Investment grade means risky?
You are correct, if you want noncallable. I found many a month ago and they dried up over the past 2 weeks. I'm hoping they're return, however, I can still get yields in the upper 4%.
Are there ANY financial instruments that offer a 5% guaranteed return on investment in perpetuity or for at least 5 years? Can somebody point me to one? Thanks !
I cannot find any at 5%/5Y. Agencies are over 5% but can be called every 3 months. The one option available to you is the Multi Year Guaranteed Annuity market which does offer 5yr rates well over 5%, and is guaranteed at the STATE level (no FDIC). Suggest you explore that route if you are knowledgeable about and comfortable with the annuity products. I have been pleased with them.
Yes at Fidelity you can get a deferred annuity for 5 years @ 5.3….and it compounds, pretty amazing
@@frankgiangreco9188 What are the risks?
Multiple year guaranteed annuities. I just got 5.7% for 5 years.
samkeino6810 BDO ALTO bank has 5Y/4.80 CD's online now. Easy peasy. That is just a hair less than 5%.🤑
yes you would be considered a fool if the us runs out of cash and starts the printing press up
That's why you can build a TIPS ladder and HTM.
Worthy Bonds at 7% interest. Scam or Legit?
If it's too good to be true, it probably is!
lock it in for 9 months
Agency bonds at these higher rates will surely be called as soon as the Fed drops rates.
Yes that is the way it is supposed to work. That is no secret . I like GSE's and plan to buy more. So what if they are called ? Your money is safe and is then returned to you. Then you just move on. They are callable every 3 months. It sounds more than fair to me. Do you have a crystal ball from the Fed ?
I have been buying noncallable GSE bonds for 5+ over the past few months. They are now gone, and you're right only callables are readily available. I am kicking myself for not locking in more of these noncallable bonds at the higher rates.
@@youtubemusic2700 Sweet ! At least you got some noncallables ! I have never even seen one. I am new to agencies, but so far, so good.
Inflation is a rela risk.
Youre basically just barely keeping pace with inflation.
I have a pension at work. I always figured I would take the lump sum when I quit, but after looking into it a little more, if I put it into an annuity, the monthly income would be more than I expected. While not a great percent return, and I could *probably* do better taking the lump and doing something else w/ it, I am strongly considering the annuity as it is only 10% of my portfolio and would nearly provide me w/ the bare minimum I would need to live. That leaves the other 90% for me to do other things w/o fear of the market destroying me.
I also have a pension, and I elected to keep it as a pension, which is guaranteed by the Pension Benefit Guaranty Corporation (PBGC). Converting to an annuity turns it into an insurance product that has no backup should the insurance company fail. My pension is below the max AMT insured by the PBGC, so should my former employer default, the PBGC will continue to pay out the pension. You should carefully consider this before taking a lump sum and buying an insurance product, as that annuity will only be paid out as long as the insurance company is solvent.
@@TexanfrmDal I either get a lump sum or the company converts it to an annuity when I begin taking payments. There is no way to keep it as a 'pension' as you describe. I need to see who administers it when they convert it.
@@TexanfrmDal Annuities are low risk because if the insurance carrier does fail, it goes into receivership in it's state of domicile. Meaning the state will assume operation and control of the insurance company until it is merged with a larger insurance company/companies. Every state has an Insurance Commission and staff of auditors. While there is no FDIC , there are 50 Insurance Commissions in place to guarantee the continuance and solvency of your annuity. So rest easy.
I'm in similar situation, retired.
Why not look at CD's or something similar to Vanguard Federal Money Market Fund, or other
Both paying over 5% and safe.
Isn’t the federal money market funds also free from state and local taxes?
I do buy brokered CD's in my IRA.
With bonds, you don't have to worry about bank failure. The federal government has to fail in order for bonds to go under.
63. I got everything and cd 5% better be safe than a greedy😂
Money market funds returns will lower with the Fed rate, while a multi year bond will stay at 5% until maturity.
Not that I'm a rich person but doesn't Treasury Direct limit me to $10k per year to invest? Hardly worth it at that level.
No. That is only for Ibonds.
A no-brainer when the Fed is about to cut rates.
So they say. Only a fool would trust their word.
@@robp9746Still a no-brainer as long as they don't raise LOL.
@@robp9746 It appears to me that
Wall Street has been "the fools" by sugar-coating every Fed Statement about future rates in order to confirm their narrative of rate cuts. I've never been convinced we would see rate cuts by June, but in January the talking heads were so sure we would have at least 3 and probably 4 rate cuts this year. What a crock. The Fed has been clear since forever that rate changes would be evidence-dependent, but that never stopped Wall Street wags from proffering their kool-aid to one and all. Kind of embarrassing, really.
Bulls make money, bears make money, pigs get slaughtered.
How do i buy bonds ? At 5.25%??
Thanks!
Thanks!