T-Bill Yields Drop: A New Attractive Investment Option
Treasury bill yields have dropped recently, making them an attractive investment option. This shift comes as the Federal Reserve hints at restarting a rate-cutting campaign, which could further lower yields on short-term investments like T-bills.
T-bills, short-term debt obligations backed by the U.S. Treasury, can be bought electronically from brokerage firms or directly via TreasuryDirect.gov, with a minimum purchase of $100. They are bought at a discount and earn interest based on the difference between the discounted price and the par value at maturity.
Investors like Warren Buffett's Berkshire Hathaway have taken notice. The company recently doubled its T-bill holdings, now owning about 5% of all short-term Treasuries. This move suggests confidence in the stability and potential returns of T-bills.
T-bill yields have been hovering around 4%, making them an appealing alternative to one-year CDs. However, demand for T-bills can decrease when the inflation rate outpaces their returns, leading to lower prices.
T-bill yields are expected to continue dropping with potential Federal Reserve rate cuts. This could make T-bills an even more attractive investment option for those seeking short-term, low-risk returns. New T-bills are sold at auction every four weeks for 52-week T-bills and weekly for shorter-term T-bills, providing regular opportunities for investors to participate in this market.
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