Tag: treasuries

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And THAT’s Why We Own Treasuries

What a week it has been culminating with the largest bank failure since 2008 (Silicon Valley Bank). I’ll write a special commentary on that in the coming week as I’m sure there are some questions.

Today, I just wanted to point out why we own Treasuries of varying maturities. They certainly haven’t been the greatest investment for the last few years as the Fed has been raising interest rates, but they are in portfolios to serve a specific purpose over the course of a full market cycle. And, as an aside, now they actually offer some attractive yields that they haven’t offered in about 15 years. Continue reading “And THAT’s Why We Own Treasuries”

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Why Do Short-Term Bonds Yield More Than Long-Term Bonds? Who Would Buy Long-Term Bonds Now?

A couple astute observers noticed something about interest rates in my last video. If you missed that video, it can be found here.

Click on the image below to watch today’s short video answering the questions about why short-term rates are higher than long-term rates, who would buy long-term bonds in this scenario and what else does an “inverted yield curve” tell us about the economy? This one is a bit more casual as I wasn’t expecting to make a video today and threw it together fairly quickly. You’d be amazed at how much time goes into even a short video like this!

Enjoy!

 

 

 

 

 

Continue reading “Why Do Short-Term Bonds Yield More Than Long-Term Bonds? Who Would Buy Long-Term Bonds Now?”

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The Bad News is Interest Rates Increased. The Good News is Interest Rates Increased.

Bond prices go down when interest rates rise and vice versa. How is that? Well, think of it this way.

Imagine you bought a 10-year Treasury bond with $1,000,000 at the end of last year when the interest rate was 1.5%. That implies $15,000 of annual interest payments over the next ten years until maturity at which point you also get your $1,000,000 principal back.

However, the interest rate for 10-year treasuries has since risen to ~3.5%. So, who’s going to want the 1.5% bond when they can go buy essentially the same 10-year bond and get 3.5%? Nobody. Therefore, the price of the 1.5% bond must fall to attract buyers so that the yield-to-maturity is aligned with prevailing interest rates. Continue reading “The Bad News is Interest Rates Increased. The Good News is Interest Rates Increased.”

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Why We Own Treasuries

I started writing this note early yesterday before the wild market action prompted by heightened concerns about Russia potential invading Ukraine.

The purpose for the note was to address why we own Treasury bonds, especially considering that they are down simultaneously along with stocks for the year thus far and don’t seem to be providing any benefit.

Then stocks fell off a little cliff yesterday to lose about 2% on the day and Treasuries made around 1% thereby answering the question for me. Continue reading “Why We Own Treasuries”