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  • msf February 2020
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Investing 101 - How to Earn Interest on Your Cash Allocation with Low-Risk Treasury

edited February 2020 in Fund Discussions
https://einvestingforbeginners.com/cash-allocation-ladder-treasuries-daah/

How to Earn Interest on Your Cash Allocation with Low-Risk Treasuries
Dave Ahern 0 comments
When large investors have trouble finding great companies to buy or invest in, they’ll see an increasing cash allocation in their portfolio. So what do they do? Most invest in treasuries, and investors can do this with the cash in their portfolios too.

Comments

  • The link that the page gives for Treasury yields is correct, but the yields it quotes for January 30, 2020 are way off on the long end.

    "The current rate of the 30-year T-bond as of January 30, 2020, is 2.33%."
    According to the Treasury page, the 30 year rate was 2.04%, while the 10 year rate was 1.57%, not the 1.88% given in the article.

    The figures it's giving are for Jan 2, not Jan 30. Which shows that in the past month or so the yield curve has flattened considerably. That in turn makes long bonds (always a play on rate movements) an even higher risk proposition.

    Looking at 10 year and below, yields are mostly between 1.5% and 1.6%. Meanwhile, VUSXX has a 7 day SEC yield of 1.52% with no interest rate risk, unlike individual Treasuries.

    If you expect Treasury yields to drop more, then locking in a slightly higher yield on T-notes may make sense. Otherwise, ISTM that it's worth a handful of basis points to have the stability of a MMF.

    Or forgo Treasuries altogether and stick with CDs. Why invest in a 1 year Treasury yielding 1.49% (as of February 7), when you can get a no-penalty 11 mo FDIC-insured CD yielding 2.0%?
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