Back in Mid-September we told you that we had been laddering US Treasury T-Bills given that the rates had finally become attractive so we have been buying T-bills almost every week in $5k or $10k blocks and we now have T-bills soon expiring. Here is a break down of the maturity dates.
- 10/18/22
- 11/01/22
- 11/15/22
- 11/22/22
- 11/29/22
- 01/05/23
- 01/31/23
- 04/06/23
We designed our T-Bill ladder to accommodate for the next FOMC meeting scheduled for November 2 which is less than a month away as of the time of this post. We expect the Fed to raise rates again and if they do we expect T-Bill rates to go up and our plan is to buy new issue T-bills preferably at a higher rate so the 10/18, 11/01 and 11/15 T-Bills that come to maturity will roll over to new issues.
What happens if the Fed pauses? We anticipated that too and bought longer dated T-Bills with slightly higher yields but a longer time horizon so if the Fed doesn’t hike in November we expect a hike in December and our 11/22 and 11/29 T-Bills will roll over into the new higher December rates.
The Fed has set expectations that rates will go up to 4.6% sometime in 2023 and we are currently at 3.25% so that leaves 135 basis point hikes yet to come. It’s important to note that most central banks around the world are currently raising rates to help stem inflation.
As with all good things, the party will eventually come to an end and as we approach that time, it will be prudent to leave with some parting gifts in the form of longer dated US Treasurys such as a 5 year Treasury with a rate above 4% or more. Let’s hope things pan out as we expect.
In the meantime, stay tuned and stay solvent…