bank rates

Passing On Treasuries: Am I Unpatriotic?

Closeup of an American flag.I was teed up and ready to go.

The previous weekend, I’d entered a relatively modest “good ’til canceled” order with Fidelity to purchase 5-year Treasury Notes in the Aug. 28 auction.

At the time, Fidelity showed the “indicated yield” as 1.715% — not great, but providing sufficient room to meet my minimum interest rate (coupon) target of 1.625%.

But then, problematic reported home sales and durable goods orders rekindled Wall Street hopes that the Fed wouldn’t begin its dreaded “tapering” in our lifetimes.

Subsequently, Syria got ugly, triggering a miniature “flight to safety.”

Predictably, Treasury rates dropped.

By the close on Aug. 27, the 5-year Treasury yield, as quoted by Bloomberg News, was 1.52%, nowhere near the original “indicated yield.”

So I canceled my order, purchasing a 2.05% American Express Centurion Bank 5-year brokered CD instead.

(By the way, the Aug. 28 auction eventually produced a 5-year Treasury coupon of 1.50% – with a 1.624% yield.)

Once again, I’d fallen back on a federally insured CD to enjoy the safety of investing in an obligation backed by the full faith and credit of the United States.

Actually, I haven’t purchased a Treasury security since June 2009.

The reason is obvious: Fed monetary policies have made Treasury yields uncompetitive with those of available CDs, at all my desired maturities.

Also, I’ve come to prefer CDs to Treasuries as an investment because the former almost always provide a “survivor option,” permitting my executor to cash out early at par in the event of my untimely demise.

Treasuries have no such option, and their values are subject to marketplace whims.

Nevertheless, the continuing absence of Treasuries from my portfolio had begun making me feel – well, almost unpatriotic.

Avoiding these investments seemed akin to spurning war bonds, or even dodging the draft, during wartime.

But the recent narrowing of the spread between 5-year Treasury yields and leading 5-year CD rates held out hope that maybe a return to the Treasury market would be possible, even if I had to sacrifice some yield and other rights.

But it wasn’t to be – at least not on Aug. 28.

I suppose I should be thankful that generally rising Treasury rates since May produced two new issue, noncallable, 5-year brokered CDs – the one I purchased and another offered by Discover Bank – yielding 2.05%.

That’s equal to the highest 5-year direct CD APY on our CD Rates Leaderboard.

As for buying Treasury Notes, I guess I’ll just wait until the next 5-year auction.

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  1. Andrew Conrad said:
    on September 12th at 01:35 pm

    I don’t think that you are unpatriotic. Before what Fed did to savers they should buy each a dinner and give a kiss.