Why More Banks May Fail | Are "Safe" US Treasuries Safe For Banks
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- Опубликовано: 19 ноя 2024
- So how could “safe” US Treasuries destroy your bank & why might this lead to more bank failures later this year or in 2024? How did "safe" US Treasuries bring down Silicon Valley Bank & could something similar happen to your bank? That’s what we’ll be talking about today.
And in particular, here are the four questions I’ll be answering:
How banks make money with your money
How this became a problem in 2022
How “safe” US Treasuries could destroy your bank if not managed properly &
What you & I can do about this possible ticking time bomb
We'll also go through the difference between held-to-maturity securities vs available for sale securities.
👉 Subscribe for all things inflation, investing & retirement!
SOURCES:
fred.stlouisfe...
www.stlouisfed...
www.npr.org/20...
www.bloomberg....
www.wsj.com/li...
www.jpmorganch...
#jenniferlammer #bonds #treasurybills
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WATCH NEXT
⭐ G-SIBS | 8 Safest US Banks: • 8 Safest Banks To Bank...
⭐ FDIC Insurance Explained: • FDIC Insurance Explain...
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> > WATCH NEXT < <
⭐ G-SIBS | 8 Safest US Banks: ruclips.net/video/cT02poJAy00/видео.html
⭐ FDIC Insurance Explained: ruclips.net/video/txmXJBGU_70/видео.html
These videos and in particular, Jenn herself are absolute gold. Discovering her has been just like stumbling across gold except I would have burned through all the gold I found and been poor again in short order. With these videos, Jenn slowly conditions my mind to think about economics and banking in particular, in a way that elevates my skills at managing my own money and making me a more educated consumer of financial products. Give a man a fish.. Thank you Jenn.
I get an education every time I watch, Jen! Thanks for being so clear and understandable for the average lay person who doesn't have a finance degree. Blessings!
Hey, how do I join the Super Saver Bond Club? Can’t find any information about it. Thanks!
ruclips.net/channel/UCnexoc6tvesvcCEzZhmI-Agjoin
Same
@@DiamondNestEggdoes CD’s produce a CUSIP ?
Will you please do a video on when to lock in longer duration treasuries. What do you look for as a signal for an optimal time to lock in 1, 3, 5, 10 year notes? Historically, yields have gone much higher than they are today, but yields are currently still much higher than the last several years.
I’m an uneducated newb, so take this for what it is worth and my level of experience. I’ve often thought of when this might make sense to buy some treasury notes/bonds for some long term returns. I’m looking at some treasury notes/bonds and when to buy.
I went and looked at treasury bond rates, not notes, historically. It looks like long term treasury rates are the opposite of the fomc interest rate. That could just be me seeing that. When the fomc rate goes up, that’s going to push money out of stocks because it will limit business growth. The treasury rates for bonds don’t go up as high as you think they would because lots of people jump into that area.
I’m going to look at long term treasury bonds, and not notes, when fomc interest rates go down. I’d like to get at least 4.5% for a long term treasury before I get excited about it. If I can’t get that, I’d like growth and equity stocks.
That’s me and my thinking. Jen can say I’m stupid. I’m watching, learning, and guessing.
You have to make decisions for you and what what makes sense for you. As Jen says, I do t have a crystal ball, and I’m not an expert.
Buy TLT, (20year)
I love your work and what you do to educate people here on your channel. Would you please do a video about what risks face short-term U.S. treasury investments in this time of U.S. government debt ceiling brinksmanship.
Will you put a video of current US dollar (devalue) issue with potential sell off - of treasuries by other countries and how that may affect govt backed treasuries? thanks.... and thanks for the continued content.
Another awesome video. Thank you so much. I've been learning a lot. The illustrations are so spot on. It makes the INFO flow into my head with little resistance as everything is explained so well.
Great video, Jenn. One other relevant fact specifically related to SVB is that their clients did not need to borrow (because their clients were initially flush with venture capital money), so SVB was not making loans and thus sitting on tons of cash. Then, as you pointed out, SVB's management decided to "reach for yield" by investing in 10-year or 20-year bonds, so they had a massive mis-match between "what was available right now satisfy withdrawals" versus "what's coming due in 10 or 20 years."
I keep hearing about the possibility of the US going into default if the debt ceiling isn't raised this summer. The question is, are T-Bills still a good option even with speculation roaming around?
@@Trust_but_Verify Where it is written, treasury bills are insured by the US govt. ?
Jennifer doesn't have a crystal ball, but she does have some killer graphs and charts... and a talking corgi!
Jennifer, would you do a segment regarding iShares SGOV vs GOVT MMFs? SGOV would be protected with SIPC vs MMFs unprotected and earn a slightly higher rate, right? Fees slightly lower than say Fidelity SPAXX. Drawbacks?
You have changed the way I look at Money, and for some odd reason I feel like I owe you.
Yet another extremely informative, well-done video! Thanks!
One of your best Jen.....sleeping better no doubt.
Many thanks. Many many many.
I use tbills similarly to you. This crazy inverted yield curve has forced my to rethink a laddering strategy. Thanks for the great vid.
Excellent as always! I appreciate your ability to present the facts SO clearly! I pas your video on to friends and family all the time! Keep up the great work! Hope your car is an easy fix!
Very thorough and well presented video as always.
I have learned so much from your channel. Thank you
Thanks Jennifer. What galls me was the announcement that ALL deposits at SVB and Signature Bank would be covered. Another TOO BIG TO FAIL situation. Totally undermines the rules about risk taking. There is no free lunch. Banks pay for FDIC insurance and their costs get passed on. And it's those banks who are covering the SVB and Signature Bank mistakes. We absolutely need to let risky banks die if their bets don't pay off.
Depositors were paid off by the FDIC because they did not take any risk by simply depositing their money with the bank. The people who lost and should lose are the shareholders, executives who took a huge interest rate risk without maintaining enough capital to cover losses.
Amazing explanation. Before your channel I didn’t know what a T-bill even was. Now I keep basically all my emergency fund in 1 to 6 month t-bills. I do worry that most banks are still paying next to nothing in interest. I suspect it probably has to do with those unrealized losses you are speaking of 😮
@@wa210 While there are CDs that have a higher APY than T-Bills, remember that CD interest is taxed as income both federally and by the state. T-Bills are only taxed federally (there is no state/local income tax). So if you live in a state that has an income tax, be sure to consider that when comparing CDs to T-Bills, often the T-Bill comes out ahead, even though it may have a lower APY. Google "fidelity taxyieldcalc" for a calculator that allows you to compare tax advantaged securities to fully taxable ones based on your state tax bracket.
Same here. I actually made the mistake of placing a majority of my extra cash in a cd prior to watching this channel.
I used to use a local community bank for savings. Now I basically just use that bank for a direct deposit account and bill pay before the rest gets quickly shuttled to t-bills, money markets or investments
@@wa210 I’m in the process of rolling 4 401ks into my Etrade account.I’m all into tbills.Just overnighted my first check .Was going to split it between 13/17’s. Don’t want to worry about this. Finally on easy street and tbills have been a Godsend.
Hi DNE. Great discussion, great energy.
index funds are all the rage for its low costs and investment pools. Can you please do a video on the most popular index funds, how to invest, how to read the fund performance for Fidelity, Schwab and Vanguard? Thanks so much!
You Rock Girl…Thanks for this❤
Will you please make a video on REINVEST function on treasurydirect t-bills up to 2 years, what interest rate would reinvest get? is it the same interest rate as day 1 when the t-bills term started, or the new rate for the same t-bills term? Thank you Jenn
Wow very good explanation
Great explanation.
Thank you for sharing knowledge and teaching us better financial concepts. Appreciated.
Best Explanation Yet. Thank You, Thank You, Jennifer!
Super good information. Thank you, I think!
Your explanation is so well done. Thanks.
Hi Jennifer
Could you make a video regarding best bank account setup.
Thanks
Irving
Noted
You are a champion presenter !
Another great video with information presented in a clear manner. 😎
And a word about those "bank assets": I have a number of corporate bonds for banks. I had some for Credit Suisse - sold them earlier this year. And it looks like some of the stock and bond investors took a hit. (Not sure if I would have lost money there). For now, I am going with safer investments - such as treasuries. Thank you for all of the advice! 🙂
Thank you so much for sharing. ❤
Thanks, well done!
Thank you! If you get the numbers for BOA please let us know. In Gratitude!
Thanks for your excellent explanations and practical investing advice. Since you enjoy putting together spreadsheets and calculations, could you provide a scenario with assumptions and calculations that would should when US Government Debt would probably not be considered "Safe" If we continue with deficits exceeding $1 Trillion per year and borrowing costs say increase to 8, 10 or 12% at what point would you consider Treasury investing to be unsafe?
What do you think of BIL ETF as a T--Bill alternative?
Really enjoy your show. Please give us some direction on, what to do with a collapsing dollar? Should we buy other Nations currencies, China or India? (and yes I have gold).
FABULOUS video, thanks!
Thank you for your infor.
In June, if the government defaults on their loan payments because they can’t raise the debt limit, what will happen to Treasury bills?
I wouldn't worry about it. Even if their was a default it will be short lived and treasuries will be paid even if there's a slight delay. The whole world's economy depends on the treasury market. I'm buying them and I'm not even a little worried about not getting my money.
@@murraypassarieu9115 There are lots more immediate threats to our existence than a US Treasury default.
If the Gov truly defaults on Treasury loan payments the dollar is toast, banks fail, it's all over for the US.
@@Trust_but_Verify If US does that, then who would trust US?
@@Trust_but_Verify Good question.
Can you please do a video on what would happen to tbills if the United States government was to default
Thank you for this video. I have been trying to explain this to a friend, and not succeeding. However, I've been trying to explain it with respect to bond funds commonly in 401k/retirement portfolios.
Have you ever thought of Classes, Trust, LLC, Economics 101, 201,Macroeconomics, Micro, Taxes now and in retirement ?
Thanks!
👍
How does just investing in a fund like USFR compare to buying t-bills or CD's or not having to open a new bank account for higher rates?
I'm seriously considering USFR or TFLO to replace my existing 13-week t-bill ladder. It's 100% FRNs, so it resets weekly to the latest 13-week t-bill rate, plus the spread, which is currently higher than the ER. That makes it more liquid and gives a higher yield. In a rising interest rate environment, it's very slightly better than a 13-week t-bill ladder. Of course, interest rates will go down eventually, so the difference is made up on that end. The added liquidity is the real benefit though. I'd be interested to get Jennifer's expert opinion on this too though.
This information is most encouraging as I felt guilty removing $10K to purchase the I-bonds last week after watching a previous video from you. As my wife and I are close to retirement and I have most of the money in cash MM accounts (all under the FDIC limit), and since you generate these wealth building videos, what is the next super saver investment advice when interest rates go down?
Jenn can u pls explain how the fdic 250k insured works. I’m a bit confused. Is that per bank per acct ? What if u have say 4 diff cd acct in one bank with joint acct but totally 300k . Does it mean if the unfortunate happen u will tk a loss of 50k? Kindly pls explain more. Thanks as always for giving us informative video.
What about persons who have more than $250,000. in a bank. Should they spread their money around to other banks? What about jumbo CD's? Are they unsafe? Thank you for the education you provide each week!
If a bank fails; i.e. is bankrupt and closes, please explain how depositors get their money back from their checking or savings account, and also from CDs that still have months to maturity. Assuming all accounts are less than $250K.
@@_-Karl-_ Thanks for the info. It is very helpful.
Hi, do you have a video explaining about buying T bills on the secondary market? I can't buy on auction as I have a foreign account with my broker. Thank you.
@@_-Karl-_ thank you very much for your help.
Based on comments from others, SVB management should be in jail.
How long do you think high yield savings account will stay between 4 to 4.5%
Ms Jennifer, I love your videos and how you explain things! I actually decided to get into treasuries (short term bills) for 2 reasons. 1. I want the full amount of interest without meekly accepting the rate the banks decide to give me while using my deposits to get the treasuries interest rate. 2. There's only two ways one may lose money in trasuries, one which you outlined in this video, selling prior to maturity. If one goes into treasuries with the set-in-stone decision to hold to maturity, the only way loss can happen is that the US government goes belly up, which I can personally guarantee will *not* happen (for reasons not necessarily appropriate here). Thank you so much for the information and the very easy to listen to way in which you do it.
Thanks for sharing
Otimo formato. Mesclado aos conteúdos sobre notícias e o canal ficará perfeito
Also, could you also mention Derivatives and why the bank have trillions in Derivatives.
Good stuff
are credit unions safe as long as I have less than $250,000 there? Are all credit unions pretty much equal in that regard of safety?
Kind of odd that most of everyone including banks is holding US treasuries for safe investing while said treasury institution is trillions in debt.
True.
If the fiat currency backing up those bonds or treasuries is no good, they aren’t any good either unless you can find a buyer!
Thanks for the video. Maybe you can help clarify since Fidelity doesn't know the answer. They offer a new issue 12 month JPM Chase CD at 5.1% that pays at maturity. I asked them if it compounds the interest daily at 5.1% and pays out more than $51 on $1000 or will it only pay $51 at maturity. It would be better to buy a CD that pays monthly and hold the monthly interest in SPAAX if the latter is the case ?
You’ll get $51 at maturity. On the bright side the taxes will be delayed a year.
HowI can make to buy treasury notes?
It seems that the FDIC would have looked at the bonds held by SVB.
And we need to recognize that the SVB executive was on the Fed Board (San Fran) so was aware of the increase trends
@@joeb1522 The 2017 tax cut act did way more to increase the national debt than any of the one-time events from 2020-2022.
@@joeb1522 Why are you only including the tax cuts for 2018 and 2019? What about 2020, 2021, 2022, 2023, 2024, 2025, and so on? Did you think the tax cuts were only for two years?
@@joeb1522 You're right about the stimulus. I really didn't want it. So I wrote checks to my favorite charities and otherwise gave it all away.
My neighbors that got it are now complaining about the inflation. They already blew their stimulus money. They should have saved it to dover some of the inflation.
@@_-Karl-_ They knew exactly what they were doing. They should all be in jail for draining our FDIC funds & not following the law/rules! They just wanted to be the first bank bail-out so all their clients (some directly from China/CCP) could get more than $250,00!!! Crooks!!
Why not
After a decade of crazy profits why did sbc get bailed out. So wrong. The rules are the rules for a reason. 94% should have lost there money. Why would banks change there way if they know they there risky investments will be insured. So wrong
Why don’t banks classify everything as available for sale? Why even mess around with hold till maturity?
I *think* this is what Elizabeth Warren has been railing on for quite some time. They made some rollback in 2018 to the post 2008 melt down Dobbs-Frank act. Loosening up the regs let them classify more holdings as htm. Not a policy expert on banks by any stretch. Just giving you a youtube rabbit hole to go down to answer your question.
@@_-Karl-_ thank u for detailed explanation. I get it now.
Wow! That last point was eye opening. Always looking forward to your videos. I appreciate the Value you always give. If I can offer anything back to you on your car trouble as that sounded like my household in 2017, buy a Tesla. The advantages and lack of maintenance, plus the current offers on the M3 and MY are hard to pass up on a dependable vehicle. Picked up a 2nd one on 12/31, paid cash. Had I waited till today I would have paid at least 5k less. I can answer most questions on ownership.
Thanks for the info
@@Trust_but_Verify $1800 yr
You're Great!
I would like to be (Marcus Aurelius)
Why has the 4 week tbill been sinking and everything else is looking pretty?
That 3.1% caught me off guard when at the same time the 8 week rose to 4.96%. Looking forward to what will happen this week coming up.
Because people want to get their money before any kind of default. They think they're buying treasuries that will mature before the government can't pay. They think the ones of 8 weeks and longer might be on the other side of that window so those are perceived as riskier. I personally don't think any of them are risky and you'd be smart to take advantage of the artificially high yields at 8, 13 and 17.
@@murraypassarieu9115 I’ve been buying 13 and 17s’ as my 4 and 8s’ come back each week.
As others have said, I believe it is because the 4-week T-Bills mature before the date originally predicted that the US would run out of money to pay their bills and congress potentially causes the US to default on it's debt. People are scared to get longer term ones due to this. The more people who bid on a security, the lower the discount, and therefore the lower the interest rate. Since so may more people are moving their money from longer term bills to this shorter term bill, the interest rate goes down. The original X date (when the US runs out of money to pay their bills) was stated to be June 5th, however I believe it has since been extended to August 18th and further predicted that congress would suspend it until September 30th. So I guess many are still afraid that it will be the June 5th date.
Do all the major brokerages (who allow me to buy T-bills) pay out the same interest rates for T-bills? In other words, does it matter who I buy the T-bills from? Does Treasury Direct pay slightly higher interest on T-bills or the same as brokerages like Fidelity & Schwab?
Yes, they are all the same, but only for "new issue" treasuries that are sold each week by the government. If you buy on the open market, then that is another story.
buy from the manufacturer why buy from a third party...when you buy from the treasury its an auction price so you dont know your rate until you get it....but buying from fidelity your buy a specific rate but they are making money off your buy so in theory your rate is lower than what they paid for it ...
See my answer to sun valley.
😂😂😂 poor Marcus.
Why do I have to keep my T-bills under $250,000 if they are fully backed by the U.S. govt for any amount if kept to maturity date? If I just set up all my laddered T-bills for auto reinvest, wouldn't unlimited funds (not limited to $250,000) be fully backed by the U.S. govt without any risk?
You don't have to. I wish I had $100 million in treasuries. I would sleep very well, and give to charities as my FT job.
@@_-Karl-_ You mentioned "the 4 lesser cases in the past involving the US not honoring debt instruments & the Supreme Court held that the govt is free to change or renege on the terms of the debt." Are you saying that the FDIC has failed 4 times in the past to pay out FDIC covered bank assets for $250,000? I thot that has never happened! Is this the same for SIPC? Are T-bills covered up to $500,000 or is it more?
4wk treasury bills rate dropped way down to 3.35%. What does this mean? The 8wk stayed higher at 4.9%. I canceled my AutoRoll and will move from 4wk to 8wk. But are 8wk going to drop next? Or is there just so much cash flowing into 4wks that the rate was forced down? Thanks...john
This is a result of HUGE demand. There are almost 3X the dollars offering to purchase bills than there are bills available. The sale is a reverse auction and the lower bids are filled first. this happens in the competitive bid auction. Retail treasury direct customers buy in a non competitive area, so they won't get the lowest rate.
@@johnschreiber1574 Do u see the 13 week rate dropping also? What T-bill are u expecting to be the best new issue rate coming up?
@@annmckeighen8729 There are almost 3X the dollars offering to purchase bills than there are bills available. I am purchasing 17 week most of the time. Money markets are just pouring money into all of these, but they seem to stay with the shortest term bills. If you look at the auction results you can see what percentage of sales are at the high, and low rates. IIRC 17 weeks were filled at the high, for 90% of the transactions.
@@johnschreiber1574 Thanks for responding. I did assume it was from excessive purchasing. I am in processing of moving $$ to 8 week bills. I also own 8, 13 & 17 week bills. What suprised me was In my treasury direct acct I auto rolled into a 4wk 912797FF9 bill at a 3.251% investment rate that settled on Apr 25. In my Fidelity account I got 4.110% on 912797FP7 that settled on Apr18, so I was watching closely. These were way down from the 4.6-4.7% rates I was recently getting on 4 wk bills which ticked upward slowly over the past 4 months. Now they dropped sharply (like the stock market) which surprised me. I have had a few 4wk bills to keep my emergency cash fund, that used to be in my bank..........Fidelity money market is paying 4.5% so if 8wk bills drop next, then I am moving to it instead....................I wonder if there is a way to see the money flows for the auctions or another method to try to better predict what the trend might be?
Are any of the current T-bills expected to get 5% presently?
Thanks for responding so quickly.
@@_-Karl-_ Thank u, Karl. Please read my recent comment about JP Morgan offering a platform for purchasing T-bills. What do u know about this?
@@_-Karl-_ Thanks,Karl. I am not sure why Jenn has not commented on my question about buying T-bills on JP Morgan. So are you saying that JP Morgan is a bank first & has a brokerage arm second? I was attracted to JP Morgan/Chase cause of the promotion bonuses & they are on the list of "too big to fail" banks. I have been in Schwab since last Nov 2022, doing Jenn's T-bill ladder with all our savings & been very happy. My husband & I just both had Roth CDs in Navy Federal that just became mature & want to move them someplace safe to do T-bills with that money. In your opinion, is JP Morgan a good option. We could make $325 bonus each for opening an investment account &, we could, if we want open a local bank Chase account with auto deposit and get another $225 bonus. Do u see any downside to this? Would appreciate ur comment.
.
@@_-Karl-_ Thanks for ur quick response! The only red flag I saw was an account closure fee of $75 to close out the account if we decide to move the Roth IRA to Schwab or Fidelity. But Schwab or Fidelity would probably cover that if decided to go back to one of them.
Just got more info from JPMorgan: The new issue T-bills can only be purchased thru their private client investment account where their is a charge (not sure how much); not thru their self directed account (where I can only purchase secondary market T-bills). I don't think I understand the secondary T-bills enough to be interested in that. What do you think? Also the bonuses only apply to the new open of a self directed account!
Thank you. SVB ceo should go to jail for malpractice. How did this incompetent ceo got his job?
banks need to offer 5% on savings and $$$ will stay there.
❤
Jenn, Did u know JP Morgan has a brokerage platform that has a way to purchase short term T-bills? They also are offering a promotion for new accounts. Please comment what u or ur readers know about this.
Jenn, can u comment about JP Morgan for purchasing T-bills in question above? Is JP Morgan/Chase in another category than Fidelity or Schwab?
turns out JP Morgan only has seldirected T-bills on the secondary market. I would have to open a private client account to purchase new issue T-Bills & that comes with fees/ commission. not what I want
17day this week
Where it is written, treasury bills are insured by the US govt. ?
@@luminiferous1960 good explanation
@@luminiferous1960 Yes, it will result in at least 535 executions, effectively congress saying "let them eat cake".
Jennifer, I am a retired Commercial Mortgage Loan Officer for a NY area Community Bank. I offer this comment based on the happenings after Dodd-Frank was passed and imposed lots of Oversight on Banking actions. Note long after Dodd Frank, the State Banking Auditors "lived " at our bank with constant periodic reviews by Federal Regulators. They would apply Acid Tests to all the mortgages being made (all Portfolio mortgages - not sold). And the reviews involved Oversight in all aspects of our Banking business which was predominantly originating Multi-family rental apartment mortgage loans. The collapse of SVB and Signature Bank were puzzling to me because of This Oversight & Acid Testing / Reviewing every move of the banks. IMHO< the simple Acid Tests of the returns of their US Treasuries and Marking To Market the value of those Securities in their respective portfolios, is simply Gross Negligence which must contain some political characteristics to it. Signature Bank Home Made videos that have surfaced on the WEB are Absurd !! Worrying Equity / Gender acceptances, etc. instead of watching the "FARM". Based on this market fact that the LT Treauries that many banks invested in, the rising interest rates rendered them to 50% or less than theire Face Values. That's an UH OH Moment that Yellen and the other Boobs didn't account for!