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The yield on US Treasuries over the past few months has created great concern over exactly where to deposit money that needs to be safe. US Treasuries have always been considered the safest possible place to keep the money.
Since the Coronavirus scare drives the panic selling, trillions of dollars have poured into the safe haven of US Treasuries. Concern over so much demand for safety has placed trillions of dollars at risk of yield loss should the correction come. Many investors are sitting on the fence, waiting to see if the Federal Reserve will lower the discount rate yet again. Smart money is betting a lowering of the rate will happen. If that happens, a built-in increase in Treasury yield will create a massive profit, but to access the profit will cause an even bigger problem for those seeking safety, what to buy next?
Treasury owners who already owned bonds and bills even purchased yields in the 2% range have positioned themselves to make huge profits. With current 10 Year Treasury yields hovering as low as .5% yields, 2% sounds like a real winner.
Many investors have rested their investments within the past few weeks by merely moving to cash or short-term Treasuries such as bills. While Treasuries have traditionally been a solid choice for parking safe money, the wild swings in this asset class recently have moved this staid choice to the volatile class.
Finding a place to deposit safe money is becoming more and more difficult. Moving to cash in banks at least stops the volatility risk.
Whatever class you choose, make sure you fully understand the risk and know that with this crazy volatile market, issues that would never be a factor are becoming the norm.
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