The 10 Year at Zero. Wow. Your Thoughts?

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The 10 Year at Zero. Wow. Your Thoughts?

Post by muddlehead »

Well, I'm not the only one my age who feels a bit disoriented these days. Wasn't long ago, when I retired , actually, it was long ago, year 2001, I was thinking I've/we've got enough in the kitty to live off 4-5-6-7 per cent CD's or Treasuries for the rest of our time on this blue marble moving through the universe. What a retirement sea change!

Fortunately, I/we still have enough to live super well not earning any interest and drawing down the principal.

How are the rest of you coping?
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Re: The 10 Year at Zero. Wow. Your Thoughts?

Post by Seasonal »

I'm seeing the 10 year treasury at 0.5% (the TIPS at -0.5%).

I'd much rather see a significantly higher real rate, but there's not much I can do about the supply and demand for bonds and the underlying economic conditions that generate them.
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Re: The 10 Year at Zero. Wow. Your Thoughts?

Post by dbr »

Risk in investing means how variable the returns on investments are. Even cash instruments such as CDs are risky because the return is variable over time. The standard deviation of annual return on CDs might be +/-2% or an interest rate range of 0%-5%. For bonds the range is greater and greater for longer durations. For long bonds the SD might be +/-10%, and for stocks more like +/-20%.
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Re: The 10 Year at Zero. Wow. Your Thoughts?

Post by fwellimort »

For individual investors with not-so-much money, EE and I Bonds long term look like a steal nowadays.

EE Savings Bond: Guaranteed 3.5% 20 year investment
I Savings Bond: Inflation + 0.2% 30 year investment (with liquidity of an online savings account after 1 year)
added with tax exemption at state/local and tax deferred

I wonder how long products like EE Bonds will last until they become re-modified again at the current rate.
Maybe the new Boglehead approach will be EE/I Bonds for bond portion in a portfolio.

Oh well. I still believe the stock market will return higher in a 20 year period but who knows. That said, I am trying to shove all my emergency fund since the past year to I Bonds. The 1 year liquidity is frustrating (hence why I have divided the purchases over several months) but it seems well worth it at current interest rates.
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