Treasury Savings Bonds Can Yield More Than Junk
The U.S. guarantees “EE bonds” will double in 20 years, for a 3.5% annual return.
It makes sense for the right investor.
Photographer: Fotosearch/Archive Photos/Getty Images
It seems like a life hack for fixed-income investing.
It’s no secret that investors are living in a lower-for-longer interest rate world. In the U.S., this is clear by any number of metrics. The Federal Reserve’s key short-term lending rate is pinned in a range of 0% to 0.25% and isn’t expected to budge for years, at least; the yield on benchmark 10-year Treasury notes is 0.69%, after never falling below 1.32% before 2020; and the Freddie Mac 30-year mortgage rate set a new five-decade low of 2.86% last week. Meanwhile, companies can borrow as cheaply as ever. One often-cited example is Ball Corp., a junk-rated aluminum-packager, which sold $1.3 billion of 10-year debt last month at 2.875%, the lowest ever for U.S. speculative-grade debt with a maturity of longer than five years.