Who Cares About Treasury Bonds?

By • Jan 24th, 2011 • Category: Make Money

Let’s face it; it is tough to obtain high yields in bonds in our present economic environment. The 10 year is currently trade at 3.66%. This suggests you’re willing to tie up 10 years of feasible growth for a return of 3.66%. Whilst there’s practically no risk of default in the event you hold until maturity, your reward is barely outpacing inflation right after you pay your taxes. If that you are looking for slightly greater returns, think about an alternative to US Treasury bonds.

Long-term U.S. treasury bills have constantly been a somewhat safe location for investors to place their capital for decades at a time. That may no longer be the case within the coming months.

Foreign investors face a risk of devalued U.S. currency, and foreign and domestic investors alike battle the risk of inflation.

But this risk isn’t stopping investors, who are snatching up long-term treasury bills in record numbers. In fact, the rates on long-term treasury bills lately jumped 19.9% in a single month. That drastic improve is unheard of in terms of treasury bills.

Federal Agency bonds
Federal agency bonds give an chance to raise yields devoid of growing risk too significantly over US Treasuries. Whilst agency bonds are not backed by the US Government, it could be challenging to imagine the federal government letting an agency default.

Maturity of these bonds ranges from one to thirty years and is usually bought in increments of $1,000. It can be for these causes high net worth investors and those with high incomes benefit the most from these forms of investments.

To put that into perspective, consider the following:

- The Fed Reserve was worried about deflation back in 2003, but bonds had what was then regarded as an huge rebound of 13.3% in two months.

Like federal agency bonds, municipal bonds are federal and state tax free. Those people in a high earnings tax states and high income earners may locate munis a good investment due to their tax absolutely free nature. These bonds, like most, are rated by Common and Poor’s and Moody’s.

Municipal bonds come into two categories:

- After the 9/11 attacks, amidst thoughts that the economy would take a nosedive, bonds started rallying. Unfortunately, though, this bold move only resulted in a 9.8% acquire over the following 6 weeks.

General obligation: These bonds are based upon the municipalities’ ability to collect taxes

Not to mention that the corresponding drop in interest rates is unprecedented. The rates on 10-year treasury notes dropped from 4.08% in October to 2.67% this month, a low that hasn’t been noticed because the mid-1950s.

Revenue Bond: Bondholders of this kind of investment will only be paid based upon the revenue the project generates. Examples of a revenue bond would incorporate a bond providing on a bridge project or electrical plants.

If you decide the paper was worthwhile you might also be interested in researching about Buy A Savings Bond and Savings Bonds Redemption.

More on this topic (What's this?)
The Futility of Leveraging Bonds
Bonds Continue To Deliver Painful Results For Investors
Read more on Bond Investing at Wikinvest
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