T-Bill & Chill, Adios
Summer is a time to relax. And relax the financial advisors and portfolio managers do. Why stress the summer days when you can chillax with 4-5% short term US Treasury yields? Oh wait, is there stress??
The days of relaxation are gone. Who chillaxes?? These are fast markets. Fast as in “fast”. If its not bolted down like a kitchen sink, toss it out the window. Today the Fed is misinterpreting the BLS by miscalculating 800K jobs, tomorrow they are dropping interest rates because of those missing 800K jobs. Who knows, but if you’re an investor, please take a look.
As the Fed announced they are dropping interest rates, markets are preparing. An interesting concept in bonds is bond duration and interest rate moves. The price of bonds have the most sensitive movements with long duration bonds. Zero coupon bonds generally have the largest bond duration of all bonds because the bonds are bought at a discount to par with a 30 year maturity. Overall, it means their price is hugely sensitive to interest rate movements up or down. We already see some of these price moves going on as displayed with the 20 Year US Treasury (TLT). April 2024 lows of $69.30 to now September $84.49 is a 22% move in bond price of the TLT.
How is your portfolio positioned for this “New New” interest rate environment? Contact us today to see how you can position your portfolio.