So the Fed has raised rates yet again – and now Fed Funds sit at 3.75% – 4.00%.
You know what local banks are offering me on my account, even after the Fed has jacked rates from 0% up to 4%?
Zero (actually about 1/2 of one percent – 50 basis points)
That would be the same 0% that they offered me for the last 10 years when Fed Funds were also at 0%. Now the Fed raises rates 400 basis points and my bank raises MY rate only 50 basis points?
That is bullshit.
There is a way to get a risk-free 4.5% now, if you’re willing to tie your money up for 1, 3, 6, or 12 months at a time. It is essentially a CD (certificate of deposit) and can be laddered the same way.
All you need to do is set up an account to buy T-bills DIRECTLY from the U.S. Government. Go to www.treasurydirect.com and set up an account. It’s free – and you can quickly link your local bank account to your Treasury Direct account.
The yield curve is massively inverted right now – a sign of recession. Six-month and one-year bills are very fat….
THEN, you start buying in chunks. Maybe today you buy some 1-month, 3-month and 6-month T-bills. Then next month you do the same. Then you do the same the month after that. Eventually, when you have laddered these differing durations properly, you will have a T-bill coming due every month and you can decide to re-invest or just take the cash if you need it – which means parts of your money are never really tied up for more than 30 days.
Shit, if you’re wealthy enough, maybe you toss $100k into the one-year bill and you are $4,600 richer next November than if you had left your money sitting in your local bank account getting screwed.
I had one of these accounts about 20 years ago – back when you actually got interest on your money. I had forgotten about it until recently.
I meant to write about this last month when there was a tremendous opportunity to lock in over 9% on an I-Series bond:
Rush on I bonds paying 9.62% is crashing TreasuryDirect website
Oh well. I got in and you didn’t. Those are the breaks. But you can STILL get up to TEN TIMES better interest rates than you get at your local bank.
Even now, I-bonds are yielding 6.89% if you can tie up your money for a year – a FAR CRY from my local bank’s paltry 0.75% offering.
Here is a sample of LOCAL interest rates:
Passbook account: 0.20%
Six month CD: 0.50%
One year CD: 0.75%
That is a screw job.
Here are the recent rates I got on T-bills through my Treasury Direct account:
One-month T-bill: 3.64%
Three-month T-bill: 4.25%
Six-month T-bill: 4.60%
One-year T-bill: 4.73%
Again, it is FREE to set up an account and it takes maybe 5 minutes. You can quickly and easily transfer funds between your local bank and the U.S. Treasury. These are RISK FREE debt instruments auctioned DIRECTLY from the U.S. Treasury.
You’re welcome.