US treasuries & high interest rates
“1. How high could they go if Fed keeps pushing rates? Wonder what they got to back when mortgage rates hit 18%
2. Are T-bills a good safe haven for those with cash right now while they see wait to see what happens?”
- Craig.
As of Sep 22, the current 1 year Treasury bill rate is 4.08% and 10 yr treasury note is 3.70%. Looking back at historical rates, there’s still a ways to go until the mid to high teens of the early 1980s when 1 year treasury bills reached ~16% and 10 year treasury notes reached 15.25%. This was in 1981 when mortgage rates hit 18%.
While I have zero qualification to guess what rates will be in the future, Fed officials expect rates to hit 4% - 4.5% by end of year and “projected that rate rises will continue into 2023, with most expecting the fed-funds rate to rest around 4.6% by the end of next year.”
So what to do in the interim? In June, Suze Orman claimed I-bonds are “a fabulous investment”. The current annualized rate is 9.62% and will be reset in November. (For transparency, I invested $10K into them this quarter.) (Note: You can only invest up to $10k per year in I-bonds.) I don’t know if this is the best investment out there right now, but my thinking was that it was a fairly safe bet. (I mean, if US savings bonds are going down…aren’t we all going down…? 😬)
A few other ideas: Forbes recently recommend 7 low risk investments right now, with US government securities at the top of the list. Bloomberg featured several experts that talk about dividend stocks, pharmaceutical stocks, and government bonds. Fidelity talks about commodities, equities, Treasury-inflation protected securities, and infrastructure as 4 areas to help fight inflation.
Anyone else out there have suggestions?
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Disclaimer: All opinions are my own. The content on this site and on the podcast does not constitute financial, legal, accounting, tax, or investment advice.
