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When (and How) to Buy Treasuries

This past year has been distressing for economies and markets around the world. From limited supply amid war, geopolitical tensions, and environmental disasters, to scrambled supply chains post-COVID, to flooded money supplies following unprecedented degrees of economic intervention, high inflation has ravaged many countries, and the US is no exception. Given the erratic market behavior that comes courtesy of economic crises, traders and investors may be hunting for safer securities to keep their money in. For those who are looking for the most stable financial assets available, US Treasuries often make the top of the list. Let’s explore when (and how) to buy Treasuries.

What Are Treasuries?

‘Treasuries’ is an umbrella term that refers to many kinds of debt securities for sale via the US Department of the Treasury. Available in short-term T-Bills, 2-to-10-year T-Notes, and 30-year T-Bonds, they are a type of financial asset that enables investors to effectively lend money to the US federal government for a set duration of time and receive a fixed rate of interest in return. Another prominent kind of Treasury are Treasury Inflation-Protected Securities (TIPS), which indexes your money to the rate of inflation in the US.

Why Purchase Them?

Owning Treasuries comes with a variety of benefits that can seldom be found elsewhere among financial assets. Perhaps the greatest perk is extremely low risk, since your purchase comes with a guaranteed return for those holding until maturation, quite different from most financial markets where traders must fend for themselves in terms of risk management. Another factor that minimizes risk is the financial stability of the US federal government, for which bankruptcy is ostensibly impossible.

Are There Downsides?

While there are unique perks to opting for Treasuries over other securities, there are built-in disadvantages as well. For those planning on holding onto a Treasury until it matures, perhaps the most noteworthy is the additional risk of inflation diminishing one’s real rate of return, since inflation is a dodgy phenomenon that cannot be anticipated perfectly.

Combined with frequently low yields on Treasuries the past few decades, there is always a chance that inflation could completely negate the income’s new purchasing power. Additionally, for those who may want to sell a Treasury before its maturation date, there is a significant degree of ‘interest rate risk’ since the security likely won’t have an identical market value to when it was first purchased.

When Are Yields Highest?

If earning passive income is the goal (rather than simply protecting purchasing power via TIPS), timing matters a great deal for the sake of purchasing Treasuries at an optimal price, i.e., receiving a meaningful yield. Historically, higher Treasury yields often correlate directly with a higher federal funds rate (which is intentional, not coincidental), with the 10-Year T-Note yielding over 10% annualized interest in the late 1970s and early 1980s. The more the Federal Reserve raises interest rates, the higher yields are likely to be; considering how hawkish the Fed has recently become to quell high inflation, substantial yields could be around the corner.

How High Could They Go?

If inflation remains a persistent threat, enough for the Fed to continue hiking interest rates according to their most recent projections, the federal funds rate might be raised to a range between 2.9% and 4.4% in 2023. If the fed funds rate does surpass 4% for the first time in over a decade, this may well correspond with the 10-year Treasury doing the same, presenting lucrative buying opportunities for those interested in waiting out high inflation for a longer-term maturation period. It could even be the case that the Fed must hike rates even more severely, in which case Treasury yields could become far greater than currently expected. Currently, the EdgeFinder market scanner rates the US 10-Year and 30-Year Treasuries as a 5 ('buy') and a 6 ('strong buy'), respectively.

Ways to Buy

Anyone may purchase US Treasuries from the US Treasury Department via the TreasuryDirect website, at recurring auctions you can track throughout the year. However, one may also buy or sell Treasuries through a variety of banks, brokers, and exchange traded funds (ETFs).


• In times of market turmoil amid economic uncertainty, it can be helpful to consider safe securities to invest in. Among these options, US Treasuries historically reign supreme.
• There are several different kinds of Treasuries which have different maturation lengths, including T-Bills, T-Notes, T-Bonds, and TIPS (which are indexed to inflation).
• US Treasuries are debt securities backed by the US federal government. They enable buyers to lend money to the US government in exchange for fixed interest payments.
• There are certain benefits to owning Treasuries that are quite rare for financial assets. Chief among them is a near absence of risk, as fixed interest payments guarantee specific returns and the chances of the US federal government going bankrupt are near-zero.
• However, there are downsides to owning Treasuries too. Perhaps the biggest risk for those holding on until maturation is that the severity of inflation will impact the real rate of return.
• For those who may want to sell a Treasury before maturation, there is ‘interest rate risk’: the Treasury’s new market value may have depreciated from the time it was purchased.
• Thus, to maximize income from Treasuries, it is helpful to wait until Treasury rates are optimal. Historically, the higher the US federal funds rate is, the better Treasury yields will be.
• Depending on how high the Federal Reserve sets the fed funds rate, it is possible that the 10-Year Treasury yield could cross well above an annualized rate of 4% for the first time in over a decade. This rate could potentially far outlast high inflation, bolstering returns.
• While all kinds of Treasuries are available directly through the TreasuryDirect website at recurring auctions, they are also available for purchase through brokers, banks, and ETFs.

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