FireAway wrote: ↑Tue Jun 21, 2022 3:36 pm
Kevin M wrote: ↑Tue Jun 21, 2022 3:16 pm
Sure there's an early withdrawal for Treasuries; you can sell Treasuries anytime you want.
I invested in some 5yr CDs a couple years ago at ~1.5%. I'm thinking now about EW and reinvesting at a couple points higher. I will lose 6 months interest, or about 0.75% of my investment to do so. That is the most I could ever lose on this investment for EWP.
Had I invested in a 5yr bond and wanted to make the same switch (reinvest for 2% better yield), or need to get at that money for any reason now, I would probably see about a 20% loss (just going by rule-of-thumb)
. That penalty could go higher.
That is true and why I have not purchased a Treasury since early 2019.
Instead I was an active buyer of CD's (direct issue and not brokered). Opened accounts at a number of different Credit Unions and Banks to take advantage of what were unique opportunities at the time (a few roughly 3-year CD's with yields of ~3.25%, several 24-month CD's at 3.0%, a few 18 month CD's at roughly 2.0% and two five year ladders with a weighted yield of around 2.0%). Many of those have matured and the funds are being strategically redeployed now into Treasuries.
Like Kevin, I targeted two 5-year ladders (two-years into them now) for early termination last week. Redeployed the proceeds into a mix of 12 and 24 month Treasuries. Yields on those Treasuries were ~3.10% for 12-months and 3.40% for 24-months (a 50% to 70% yield pickup over the CD's).
I am now buying a mix of Treasuries (began in May and accelerated last week) - mostly a split between 12 and 24 month (and some roughly 6-months in duration). Since I think yields are more likely to go higher than lower, I am holding my fire on intermediate (what I'd consider ~5-year) and longer-term (what I would consider ~10-year) Treasuries. If rates spike up from here I will be a very active buyer of Treasuries with those maturities.
Bottom line is there is a place for both CD's and Treasuries. However, in my experience, they don't present as opportunities at the same time. Some times CD's are more appealing and some times Treasuries are. Now, Treasuries are.