US Treasury Yields VS. FDIC-Insured Deposit Rates

April 10, 2012 No Comments »

US Treasury Bonds 2012Here’s an interesting question we’ve received over the weekend from BankVibe.com reader Angie:

“What’s a more logical cash investment to get involved in during a dull landscape for savers – FDIC insured savings accounts and/or deposits or US treasury bonds?”

Answer: For a lesser hassle take the crummy CD rates.

Disadvantages of US Treasuries Bonds:

- US Treasury Bonds are nothing like fixed rate deposit products. They are traded in large volumes throughout every trading day and their yields are directly effected by daily market conditions.

- For average investors, say anyone looking to stack away less than $10,000, these products are difficult to deal with (and expensive to purchase). If you’re looking to invest smaller amounts of cash, you’ll have to invest through bond funds which pool together smaller investors’ funds.

Advantages:

- Because of the fluctuation of US Treasury Bonds, their rates could rise while your holding them providing better returns on your investment.

- They can be sold by the holder at any time. If you’ve found a better cash investment, taking your money out of a US Treasury note comes without penalty. Almost all bank deposits impose strict financial penalties for any early withdrawal.

- Long term Treasury Notes (see rates below) are currently providing much higher returns than long term bank deposits. Conversely, short term Treasury Notes are providing practically nothing in returns.

Today’s Treasury Yield Curve Rates:

(For updated information visit the resource center at www.Treasury.gov)

- 3 month CMT (Constant Maturity Treasury) yielding 0.09%

- 6 month CMT (Constant Maturity Treasury) yielding 0.15%

- 12 month CMT (Constant Maturity Treasury) yielding 0.19%

- 24 month CMT (Constant Maturity Treasury) yielding 0.32%

- 5 year CMT (Constant Maturity Treasury) yielding 0.90%

- 7 year CMT (Constant Maturity Treasury) yielding 1.42%

- 10 year CMT (Constant Maturity Treasury) yielding 2.06%

- 20 year CMT (Constant Maturity Treasury) yielding 2.82%

- 30 year CMT (Constant Maturity Treasury) yielding 3.18%

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