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You’re comparing Mexican bonds with US T-notes? US 3-month treasuries are the risk-free for the entire world. Every investor and every country in the world (bes
by mruts 7y ago
You’re comparing Mexican bonds with US T-notes? US 3-month treasuries are the risk-free for the entire world. Every investor and every country in the world (besides maybe North Korea or something) hold them in massive quantities.
- kgwgk 7y agoObviously not “every investor” does hold Treasury bills, not even in the US. And if you don't like the Mexican bond example [1], let’s say it’s for the same reason that Joe from Baltimore was not interested in buying Australian government bills a few years ago (when they were yielding 2% more than US treasury bills). Note that the rating for the Australian debt is better than for the US... [1] it’s true that a comparison of 3m bills (8% yield in Mexico vs 2% in the US) would be more appropriate.
- badpun 7y agoThey're not risk free, because there's always the currency risk. 20% of my portfolio is US govt bonds, but that's mostly to hedge against the fall of my country's currency.
- mruts 7y agoYou’re right, nothing is risk free. In finance though, the three month US Treasury bill yield is considered the risk-free rate. The only reason why this matters is that the risk-free rate is built into almost all financial equations and models.