Looking at the 17 week t-bill today. Rate is at 4.3% . I will see what the 6 month and 1 year rates are soon. Rates were higher 10 days ago according to this:
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Weighing 4.5% 1 year CD and next 26 week T-bill
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Kathy Jones, managing director and chief fixed income strategist for the Schwab Center for Financial Research, said the central bank is sending signals that the fed funds rate will peak at 5%.
The Fed will likely continue to press toward a 5% terminal rate unless a significant change in the inflation and employment outlook occurs, Jones said. Such a peak would probably be too high than what is warranted, according to Jones, as the economy is “only beginning to feel the impact of the tightening.”
“There’s a good chance that the Fed is going to overshoot,” Jones said.
Herbert Hoover
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With all due respect to Ms. Jones, in order to stop inflation with monetary policy, the Fed rate will at some point need to exceed the inflation rate. Look back to the early 1980s. At the moment that will take the rate way past 5%.
Like maybe 8%. If we get to that level of rates on the 30 year I’m going to buy and hold. My life expectancy is 33 years, it’s a good match.
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Probably won’t reach 8% as it’s likely the inflation numbers will remain understated
I do like how much T-Notes are paying
I read that the 52 week t-bill may hit 5% next week.
Schwab Bond Market Update for December 2024
“The market implied Fed funds rate for December 2025 has risen from sub 3% to the 3.75% to 4% area”
If we stick a landing at 4% or just below… that’s not so bad for us savers. T-Bills will be there, and I’m guessing Ally Bank Saving will probably be at 3.25%-3.5%. Beats almost nothing at Bank of America, Wells Fargo, Citi, Chase. The reason given is:
“Inflation is proving to be somewhat sticky. Core PCE, which excludes volatile food and energy prices, has stalled at a slightly higher level partly due to persistently high housing costs. Expected proposals in Washington, such as tax cuts, tariffs, and immigration changes, could all end up being inflationary.”
Oh myyyy… you mean grocery prices aren’t magically going down next year?
I’m realizing… Ally Bank Savings could end up = inflation rate. But after taxes, you get less than the inflation rate. OK, that’s not so nice. People often don’t consider that inflation is a stealth tax increase in many ways. Not only in this example, but also in the case of capital gains. You might hold an asset for 30 years which just keeps pace with inflation, but after 30 years at 3% inflation, the nominal value is up 142.73% and you get taxed on that when you sell.