Some treasury bills now pay 5%.  What investors need to know

Some treasury bills now pay 5%. What investors need to know

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If you’re looking for a relatively safe place for your cash, treasury bills have recently become more attractive, experts say.

Supported by the US government, goods of treasureor treasury bills, have terms ranging from four weeks to 52 weeks, and investors receive interest when the asset matures.

Over the past year, Treasury bond yields have surged following a series of interest rate hikes of the Federal Reserve – with the possibility of more soon. Treasury yields have been low since the Great Recession, with the exception of 2018.

“I think people are shocked that the returns are so high,” said certified financial planner Anthony Watson, founder and president of Thrive Retirement Specialists in Dearborn, Michigan.

Currently, short-term Treasury yields are higher than long-term yields, known as an inverted yield curve. “That means the market expects rates to come down in time,” Watson explained.

Yet Treasury bond yields are competitive with other options for moneysuch as high yield savings accounts, certificates of deposit or Series I Bonds, he said. Of course, the best choice depends on your goals and timeline.

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He said 26-week Treasury yields appear to reflect that investors expect continued rate hikes until this point. But terms beyond 26 years, such as 1-year Treasury bills, are “still quite attractive”.

However, the Looming US debt crisis may also affect investors’ willingness to buy Treasury bills maturing around the deadline, Enna said.

“It seems like a very small risk, but people will be aware of it as summer approaches,” he said.

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