**Main Street Investors Break Records in Rush for U.S. Government Bonds** **Rising rates, falling stock prices have prompted a surge of cash into U.S. Treasury funds as well as a craze for inflation-linked savings bonds** **By Sam Goldfarb, The New York Times, June 1, 2022**
**Lured by higher interest rates and spooked by turmoil in stocks, investors poured a net $20 billion into mutual and exchange-traded funds that focus on buying ordinary U.S. Treasurys over the four-week period ended May 25...**
**Individual investors grabbed $928 million of two-year notes at a recent government-debt auction, the most in more than 15 years, selecting bonds themselves partly to dodge management fees. They also have swamped the Treasury Department in pursuit of the government’s inflation-linked savings bonds [I-bonds], now paying an initial interest rate of 9.62%....Sales of the bonds through TreasuryDirect, which are limited to $10,000 a person each year, have totaled a net $14.9 billion since November, about $6 billion more than the previous 20 years combined....** [end quote]
It costs nothing to buy Treasuries directly using TreasuryDirect.gov. It’s better to buy individual bonds than a bond fund because the bonds can be held to maturity (guaranteeing return of principal) while the NAV of a bond fund will fall when rates rise.
The rates for my paper I-Bonds (bought in 2001) reset today. I expected the increase in interest but was still pleasantly surprised. My I-Bonds are yielding more in interest than my Social Security. (Not that I am cashing out the I-Bonds before maturity, nope!)
Conservative Main Street investors who hate volatility and risk are attracted to safe Treasury debt. Investors who are not risk-averse shake their heads at the low yields and prefer stocks and other fast-growing investments…but now they are looking at significant drops, probably with more to come.
WHAT? Yields are still a lowball joke that fall far short of the inflation rate.
As I stated before, this bond bubble is the most idiotic in the history of the world, because it lacks even the hollow promise of hitting the jackpot that you normally expect from an asset bubble. It’s more idiotic than meme stocks, Dot Con stocks, and the infamous tulip bulb bubbles combined.
I’m very very tempted to buy multiples - I think I read that businesses can buy them - - my LLC’s for rental home might count.
Devil’s Advocate- because if I wasn’t paranoid then well, I couldn’t be me.
We’ve seen in recent history - whether it local tragedy, societal norms, geopolitical upheaval, things we used to deem “oh that won’t happen” - CAN happen.
So with Uncle Sam (I hope that’s your pronoun of choice Sam…)…being trillions in debt. And trillions being added for fun…while things like health, infrastructure, and education are NOT close to being ok…how possible is it that the USA one day - DEFAULTS? Let’s see… who would lose?
Everyone from China to Israel has lobbyists and special interests.
What about you? What. about me? I dunno about you but I don’t have lobbyists. I don’t have insider access. What stops a beyond broke government from saying “Sorry, we’re halving your interest. Or, we’re just gonna keep your money, we need it for World War 5.0. Or - if you’re higher income lt net worth -sorry - not gonna pay you. If you don’t like it hire a lawyer, and pay him $600 an hour for 10 years because our side can afford it”.
Serious. I’m not being political. I know the answer is - with SOME validity “well if the government defaults we have bigger problems” - - yeah, maybe - but them keeping our money would make a crappy time a bit more crappier. I Googled it, and losing money sucks.
Any opinions? This is the one thing that prevents me from max’ing out what I can buy - and then some.
So with Uncle Sam (I hope that’s your pronoun of choice Sam…)…being trillions in debt. And trillions being added for fun…while things like health, infrastructure, and education are NOT close to being ok…how possible is it that the USA one day - DEFAULTS? Let’s see… who would lose?
Possibility is very low. For one, the cost of debt service at the moment isn’t particularly high compared to historical norms. And even if it were, taxes could be raised a lot to get back to historical averages.
And even then, we owe most of the money to ourselves, and the rest of the money is denominated in USD, a currency we control.
“Possibility is very low. For one, the cost of debt service at the moment isn’t particularly high compared to historical norms. And even if it were, taxes could be raised a lot to get back to historical averages.”
How politically easy is it to raise taxes? In recent history - some have tried and failed. And they tried to raiser taxes for things like health care and infrastructure. This would be raising taxes - – to pay bondholders interest. If health and infrastructure wasn’t political impetus enough to raise taxes - I’m not sure “paying bondholders” will be enough.
with SOME validity “well if the government defaults we have bigger problems”
If the US defaults (and it is bound to happen sometime in the sweep of human history) then nothing else matters. The stock market will crash. People will think 2008 was a walk in the park on a sunny day. 1929 Breadlines will be a fond memory, if there’s bread at all.
It won’t all happen the next day, of course, but un-repaired you can count on economic devastation throughout the country, and presumably around the world, unless the renminbi has become the global currency.
The only thing that makes a dollar a dollar is confidence. If that’s gone, all bets are off.
