Hello, and welcome back to Powering Your Retirement Radio. In today’s episode, I want to discuss the most often question I get these days: “Should I buy Treasury Bills?” I also want to discuss what happened with Silicon Valley Bank (SVB).
It seems like several times each week. Someone calls to ask what I think about buying Treasury Bills. I first want to know why they want to buy them. Is it because they have extra money languishing in the bank, or do they want to move money from their current investments to something guaranteed?
Either way, you can make a case for it, but you need to determine if it is shifting money that is already invested. What will cause you to change your investments in the future? If it is cash in the bank, then it is a little less complicated. With rising interest rates, you should plan to buy bonds that you plan to hold to maturity, in my opinion. You can trade them, but that changes the simplicity of buying a 3- or 6-month Treasury Bill that will mature at par.
I will tie in with why this is what happened that caused the failure of SVB. Being forced to sell longer-dated Treasury Securities that were in a paper loss position because of interest rate increases. If they didn’t face a run on the bank and could have held to maturity, they would have gotten all their money back. Unfortunately for SVB, they were forced to realize the loss and caused the second-biggest bank failure in US History.
Have a listen for the complete story.