Five alternatives to 0% yield U.S. treasuries
This week the 4 week T-bill rate was driven down to 0% and the demand for these treasuries was astounding. It seems that investors are so pessimistic that they are willing to accept no yield for the safety of their principal. If you have been following the markets for the last few months it does seem like every other asset is falling. So, where could we put our cash if we do not want 0% yield treasuries?
1. I-Bonds - If you believe in the safety of treasuries, then you should have the same faith in I-Bonds because they are also issued by the United States Government.The current fixed rate is 0.7% and semi-annual inflation rate is 2.46% so the composite rate is 5.64% for at least six months.
2. Certificates of deposit- Practically all banks are still offering certificates of deposit with yields higher than 0%. The Fatwallet forums maintains a good list of the current rates at various institutions.
3. Checking/savings account - Most checking accounts do not pay interest, but your money is free for use. Many online and offline savings accounts are still paying decent yields above 2% and they are FDIC insured up to $250,000 per account.
4. Pay off debt - Instead of buying 0% treasuries, it would definitely be better to reduce any debt you have with any extra money you have. If you keep your money in an investment that pays nothing but your debt rises at a positive interest rate, then you will be able to pay less debt in the future with the money you have now.
5. Bury it - You may laugh at this one, but some people are dead serious about making their own treasure maps and burying their money. This may not be a bad idea in case there is some true catastrophe and there is no way to reach your financial institutions, but then again, someone could find your stash and dig it up.
I am sure that you can think of many other places to stash your cash amidst this very pessimistic investing season. Giving an interest free loan to the United States government may be seen as patriotic, but it is definitely not your only safe bet.
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