An almost constant refrain from frustrated income-focused investors and savers alike over the last few years is that interest rates have been close to zero. And now with all the talk of inflation and rising rates, some investors have failed to notice that shorter-term US treasury bills and notes (which are guaranteed by the US government) are now offering somewhat compelling yields. This quick note shares a few important details.
For starters, here is a look at interest rates on Treasuries as of the end of last week, versus 1-month ago and 1-year ago. As you can see rates are now considerably higher.
For example, the yield on 91-day T-bills is now over 3.2% and the yield on a 1-year treasury is above 4%. This is a lot more than a year ago. And those are rates high enough to get a lot of investors interested.
For example, if you have some of your money in cash (maybe an emergency fund) you might consider buying some shorter-term T-bills.
As a reminder, treasuries are guaranteed by the US government. Also, you generally pay federal tax on the interest but no state tax. You can buy treasuries directly through most brokerage accounts, and the minimum is usually around $1,000 (depending on which broker you work with).
Of course, your decisions depend on your goals. It’s our strong view that this market will eventually recover (and go much higher), but if your investment timeframe is shorter (and you’ve had enough of all the risk and high volatility), then treasuries may be increasingly compelling to you.