Wednesday, November 2, 2022 |
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MANAGING DIRECTOR: |
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US Treasury Market |
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| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 10/26/22 | 3.54 | 4.11 | 4.47 | 4.54 | 4.39 | 4.41 | 4.20 | 4.12 | 4.04 | 4.38 | 4.19 |
| 10/27/22 | 3.76 | 4.13 | 4.44 | 4.50 | 4.30 | 4.29 | 4.09 | 4.01 | 3.96 | 4.32 | 4.12 |
| 10/28/22 | 3.75 | 4.18 | 4.51 | 4.55 | 4.41 | 4.38 | 4.19 | 4.10 | 4.02 | 4.38 | 4.15 |
| 10/31/22 | 3.73 | 4.22 | 4.57 | 4.66 | 4.51 | 5.45 | 4.27 | 4.18 | 4.10 | 4.44 | 4.22 |
| 11/01/22 | 3.72 | 4.23 | 4.58 | 4.75 | 4.54 | 4.48 | 4.27 | 4.18 | 4.07 | 4.37 | 4.14 |
Source: U.S. Department of the Treasury, as of 11/01/2022
YOU ALWAYS WANT WHAT YOU CAN’T HAVE
Ever notice how it seems people always want things they cannot have? The desire to possess things that feel out of our reach is human nature.
An example of this was last week when Americans raced to purchase I bonds or inflation adjusted savings bonds. Americans bought approximately $2 billion worth last week alone. This equates to twice as much as during all of fiscal year 2021. In just the past year, about 3.7 million accounts were created on the site, TreasuryDirect, more than the prior ten years combined. Last Thursday alone, users opened 82,000 new accounts and bought $750 million in I bonds.
So, what was the attraction you might ask? As one of this year’s best-performing investments, I bonds are designed to help protect Americans’ savings from inflation. Currently, I bonds offer a 9.62% interest rate, but that rate is expected to drop to 6.47%. The good news is for those who bought before the October 28th deadline, as they were able to lock in the higher rate for six months.
The attraction of the higher rate for 6 months unleashed a flood of demand which overwhelmed the TreasuryDirect website. For days, potential customers were met with the greeting, “We are currently experiencing unprecedented requests for new accounts and purchases of I bonds. Due to these volumes, we cannot guarantee customers will be able to complete a purchase by the October 28th deadline for the current rate”.
Some of this demand was perhaps just confusion that the rate is guaranteed beyond just 6 more months. Maybe customers mistakenly thought they were locking in that rate for the full 30 year maturity.
Whatever the reason, this does raise the question that if thousands of investors are willing to spend time trying to set up an online account to purchase an investment that limits you to just $10,000 per calendar year, what is going to happen when today’s decade and a half highs in fixed-income yields get away? When this opportunity passes, will it be another example of something that got away…?
An example of this was last week when Americans raced to purchase I bonds or inflation adjusted savings bonds. Americans bought approximately $2 billion worth last week alone. This equates to twice as much as during all of fiscal year 2021. In just the past year, about 3.7 million accounts were created on the site, TreasuryDirect, more than the prior ten years combined. Last Thursday alone, users opened 82,000 new accounts and bought $750 million in I bonds.
So, what was the attraction you might ask? As one of this year’s best-performing investments, I bonds are designed to help protect Americans’ savings from inflation. Currently, I bonds offer a 9.62% interest rate, but that rate is expected to drop to 6.47%. The good news is for those who bought before the October 28th deadline, as they were able to lock in the higher rate for six months.
The attraction of the higher rate for 6 months unleashed a flood of demand which overwhelmed the TreasuryDirect website. For days, potential customers were met with the greeting, “We are currently experiencing unprecedented requests for new accounts and purchases of I bonds. Due to these volumes, we cannot guarantee customers will be able to complete a purchase by the October 28th deadline for the current rate”.
Some of this demand was perhaps just confusion that the rate is guaranteed beyond just 6 more months. Maybe customers mistakenly thought they were locking in that rate for the full 30 year maturity.
Whatever the reason, this does raise the question that if thousands of investors are willing to spend time trying to set up an online account to purchase an investment that limits you to just $10,000 per calendar year, what is going to happen when today’s decade and a half highs in fixed-income yields get away? When this opportunity passes, will it be another example of something that got away…?
This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.
•Not FDIC Insured •No Bank Guarantee •May Lose Value