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  4. Any Thoughts On Purchasing 10 Year Treasury Notes As It Approaches 5%?

Any Thoughts On Purchasing 10 Year Treasury Notes As It Approaches 5%?

SMT1
  |     |   38 posts since 2018

The 10 year briefly rose to 5% back in October 23. Could be a good time to lock in 5% should we get there?

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w00d00w
  |     |   360 posts since 2012
For me, it'd be a difficult call between 10 year Treasury @ 5% and 10 year TIPS @ 2.6+% (if it reaches that level). In that scenario, if annual inflation is higher than 2.4% over the next decade, TIPS will come out ahead. If less than that, nominal Treasury will do better. So it depends mostly on an individual investor's inflation expectations and tolerance for taking on "excessive" inflation risk with the nominal Treasury. Personally, I'd lean slightly toward the 10 year TIPS.
The next time 10 year Treasury goes to auction is May 8th.  10 year TIPS May 23rd.
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Vernazza
  |     |   31 posts since 2022
Without knowing your overall variety of investments or your age and tolerance for risk, it is hard to say. A younger person is able to take on more risk, since they have a longer timeframe to recover from any downturn. That being said, as you near retirement consistent interest payments guarantee by the federal government can offer a great income stream and 5% is a good rate. The NASDAQ is now performng worse than cash, YTD for the NASDAQ is only up 1.75%. You could consisder a mix of longer and shorter terms. Don't abandon stocks all together, there could be a good buying opportunity coming up. Without knowing some key data points, I would lean to saying yes, a 5% 10 Year Treasury could be part of your investment portfolio.
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SMT1
  |     |   38 posts since 2018
@Vernazza

Thanks for your input. My impression is that most, not all of the folks chasing yield on this website are not investing much or at all in the stock market.

I’m 70 and don’t need to build a nest egg. Just looking for capital preservation to pass on to my beneficiaries. I have considerable experience in the stock market but have zero interest in it unless there were some massive sell off like in 2000.

It seems most viewers on DA would be happy to lock in 4-5 year CDs at 5%. As long as you don’t need the cash…why not 10 years? The worse that could happen is runaway inflation where 5% is not so good anymore. On the other hand, as seems to be the forecast, rates go down and you’re sitting on a good 5% investment. And if you wanted to exit the investment in a lower rate environment there would be no EWP and you would have profited with capital gains on the investment over and above the 5% earnings.
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Vernazza
  |     |   31 posts since 2022
I like treasuries at 5%. Holding cash is beating the market right now. As you know, they are exempt from local and state taxes too. You are already getting social secirity and possibly a pension too, plus 5% treasuries. After 15 years of low rates, we know a good rate when we see it. You can't go wrong.
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SMT1
  |     |   38 posts since 2018
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SMT1
  |     |   38 posts since 2018
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SMT1
  |     |   38 posts since 2018
State and local tax exemptions are an added bonus that helped my yields in the past when I lived in CA, then again when my primary residence was in SC, but now I reside in the great state of FL where there are no state taxes.

Currently, I’m invested in short term T Bills at 5% thru Treasury Direct, but may be tempted to lock in that 5%@10year if we pop there again.

There was some respite with rates circa 2018-2019 that many readers of DA latched onto with some rates that popped up in the 4% range that were gobbled up then disappeared. Fortunately, for those that got those rates, their CD’s have been maturing in 2023-2024 when rates have gone back up even higher. Just lucky!
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w00d00w
  |     |   360 posts since 2012
“We are in a danger zone right now,” Ales Koutny, head of international rates at Vanguard, said in an interview. Even a small move higher — past the critical 4.75% level — could force investors to abandon their bets on a rally, giving way to a wave of selling that could push yields toward the highs of 2007, he said.
https://finance.yahoo.com/news/vanguard-warns-10-treasury-yields-102457409.html
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