Any Treasury investors thinking about dumping T-bills? I have a little bit of 4 week T-bills that have had the return decline steadily since the inflation indicators improved.
I'd like to point out also, that what you're actually looking at is reinvestment risk right now, not technically since they're Z-Bonds, but the essential risk that you won't buy them at a similar discount. So six of one, half a dozen of the other.
The possibility that with 4 week T-Bills that the rate will continue falling and when you're dealing with a 28 day investment period, you're looking at eating that immediately. The reason I like 13 month no penalty CDs at 4.15% is I'm earning just a hair under what the Treasury is paying you, but I can get my money back out in a split-second, or I can leave it in there for a 13 month duration, which means if rates fall, I leave it alone, if rates climb I break it and buy a fresh one, if an emergency happens and I need to raise cash, I break it and I have the cash.
4 week bills were a no brainer when they hit like 5.5% or something which was three-quarters of a percentage point higher than a no penalty CD, but now they're nearly on par with a 13 month zero risk investment, which gives you a much longer time frame.
And since you can break and buy, I usually break and buy every 2 weeks or so if interest rates are unchanged, then when they fall I can be on a glide path with 13 months from that point.
I do face some loss from state tax that the CD interest faces, which are not an issue with Treasury debt, but even then, it's not much of a concern unless you're in a really high income tax State. For investors in States with no income tax, there's no advantage to Treasury debt there.
There's different variables at play here. In the tax case, I face a loss of about $40 per $1,000 in interest going with the CDs, but some will lose none, others could lose over $100.
