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The US Treasury issues 3 types of securities to fund our now massive government debt. T-bills mature in up to 1 year, and are bought at a discount to their maturity value. Treasury notes cover 1 year maturity out to just under 10 years, and 10-30 year maturities are known as Treasury bonds, even though collectively they are all commonly referred to as “bonds.” But oh have they gone in different directions! The table below shows that long-term bonds (TLT) are still deep in the red, over every time frame that “matters” to me. And long rates are poised to potentially move higher. If that occur and we see anything close to what JP Morgan CEO Jamie Dimon suggested, 6% yields on 10-year bonds, that likely means long-term rates will be higher than short-term rates for the first time in a while. If that happens, that would be THE classic recession indicator.
T-bills, on the other hand, have been stable in price (as is their nature), they yield more than most stocks, and at more than 5%, are as competitive with inflation rates as they’ve been in some time. This is why I am such a fan of high allocations to T-bills. Not forever, but for now.
Because while those rates likely will fall at some point, until that time I get a “free look” at how the various financial markets messes and excesses will play out. It buys me time and pays me 5%+. I’d call that more than a free look. That’s a well-paid look! And so any investment alongside that needs to offer me a better reward/risk tradeoff. They are out there, but not in many of the usual places.
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