Jump to content

Holding treasury notes in lieu of bank deposits


Recommended Posts

I've been trying to weigh the advantages of buying individual treasury notes in lieu of holding cash. It seems like you could get about 2% on a 2 year treasury note, but a fraction of that through a CD or high yield bank account. It seems like if I needed fast liquidity I could always sell the treasury notes before maturity, but otherwise at least get some yield. 

 

Does anyone do this? Do you just buy the notes through your broker? I need to reach out to see if I can do this at Chase or Schwab which are my two current brokers, although I could set up a separate account if there's a better platform.  

 

I prefer the idea of buying individual notes rather than buying a bond fund to avoid fees or unintended exposure to longer duration or riskier assets. 

 

Also, it looks like you can buy these on treasury direct, but I'm not sure how you would go about selling them before maturity, so I feel like doing this through a brokerage would be preferable. 

Link to comment
Share on other sites

There's a thread on iBonds here. Is probably worth a read if you haven't seen it.  Most likely a better alternative for at least some of the cash as long as you can handle the first 12-months of illiquidity. 

 

7+% rates. Inflation hedged. Govt guaranteed. And liquidity after the first 12 months with no principal risk. 

Edited by TwoCitiesCapital
Link to comment
Share on other sites

To answer your first question, yes. In-fact, I also noticed the relatively attractive looking yield on the two-year this week and put some idle cash to work. My accounts are at Fidelity and it is very easy to buy individual Treasurys. Treasurys are the most liquid market in the world so very little risk. Small duration risk but with the individual securities you can alway hold to maturity. Outside of I Bonds, the 2-year treasury looks like the best deal out there for cash presently. 

Link to comment
Share on other sites

17 hours ago, tede02 said:

To answer your first question, yes. In-fact, I also noticed the relatively attractive looking yield on the two-year this week and put some idle cash to work. My accounts are at Fidelity and it is very easy to buy individual Treasurys. Treasurys are the most liquid market in the world so very little risk. Small duration risk but with the individual securities you can alway hold to maturity. Outside of I Bonds, the 2-year treasury looks like the best deal out there for cash presently. 

Glad to get some reinforcement that I’m thinking of this right and agreed that the 2 year looks attractive. I’m not willing to go much longer on duration but it would take a sharp increase in interest rates to do worse than a bank account here. Will probably try to buy in both my accounts to experiment with the platform. I think for Schwab this needs to be a broker assisted transaction or else I’m just missing stupid and can’t figure out how to place this as an electronic order. 

Link to comment
Share on other sites

  • 2 weeks later...

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...