5 ms·
There are multiple places. For sure other banks. JPM and other “too-big-to-fail” banks received billions of dollars in deposit inflows over the last few days[
by icecap12 4y ago
There are multiple places. For sure other banks. JPM and other “too-big-to-fail” banks received billions of dollars in deposit inflows over the last few days[0].
But for me personally, I’ve been moving cash to US Treasury bonds, and based on recent bond prices, so have others. Short term treasuries were nearing a 5.1% yield as of early last week, and now are below 5% due to demand.
Last fall, I moved cash to HYSA accounts for a higher yield, because my bank was still paying 0.05% interest, presumably because they were loaded with low-yield treasuries and mortgage-backed securities.
In general, a bank is not a great place to park tons of money, at least that’s what I’ve learned. I’m tired of getting screwed by them. What the media calls “faith in the banking system” I call getting bent over. Of course there are valid uses for banks, especially in business. But I’m done parking large amounts of cash there.
[0] https://www.reuters.com/business/finance/jpmorgan-other-big-us-banks-flooded-with-new-clients-post-svb-collapse-ft-2023-03-14/ https://www.reuters.com/business/finance/jpmorgan-other-big-...
- HPsquared 4y agoThat's a double whammy. If you hold a large amount of cash in a low-yielding bank account, you not only get less yield but are also exposed to the possibility of bank failure (which is itself increased by the increase in treasury yields).
- oblio 4y ago> Short term treasuries were nearing a 5.1% yield as of early last week, and now are below 5% due to demand. How short term are we talking about?
- cypherpunks01 4y agoShort term duration is generally considered 1 year or under. The Treasury sells bills for 4, 8, 13, 17, 26, and 52 weeks.
- pclmulqdq 4y agoThe 4 week is yielding 4.5% as of the last auction. These rates are all annualized, by the way, so you aren't getting a 4.5% bonus after a week.
- cm2187 4y agoYou bank is likely more stable than your broker.
- IAmGraydon 4y agoGood luck when Congress fails to agree on the debt ceiling issue in June, defaults on treasuries and government bonds become nearly worthless.
- ericpauley 4y agoMost everything is eventually wrapped treasuries. If the US government defaults you have far bigger worries.
- grey-area 4y agoWhy go for a hard default when they can soft default (as now), and nobody cares? Yes republicans in Congress will try to force a crisis, no it won't actually mean government bonds become worthless.
- xeromal 4y agoThat scenario is a can of beans and hunting deer with my 30-06 kind of situation if it really gets that bad.
- mastax 4y agoIf you're going to hold until maturity, I don't see how the debt ceiling affects you significantly (any more than it would affect the entire asset market). The treasury will pay you eventually, likely within days. If you are holding 10 year treasuries and were planning on selling them on the secondary market in July, yeah that could be very bad.
- icecap12 4y agoThe situation you've described has never happened. Out of all the options, it is considered the safest. People forget that the dollar is backed by the ultimate currency - military force.
- revscat 4y agoThere is a possibility that members of Congress are actively seeking to undermine the financial strength of the United States, and to do so will not vote to raise the debt ceiling. Weakening the federal government is their goal, conservative social issues are merely justifications. I’m not sure what relevance you think the military has here in this situation.
- pjc50 4y agoBanks never were great for yield, only as a place to route all your payments through, and even that is done badly in the US system as compared to Faster Payments.
- gadders 4y agoHow are you holding those bonds? Are you getting physical certificates and putting them in a safe/safety deposit box? If they're held electronically in a custody account at a bank that goes bust then I'm not sure you will be much better off.
- mywittyname 4y agoNot the OP, but I assume they are holding them in TreasuryDirect.gov.
- berkle4455 4y agoVery unlikely, TreasuryDirect is so horrible to use, only if you must like I-Bonds. You just go into your brokerage and buy them on the secondary or even through auctions. TD Ameritrade and Vanguard brokerage accounts make this extremely easy. You can also sell your bonds whenever you want instead of waiting til maturity this way.
- gadders 4y agoThe point I was trying to make, though, is that TD Ameritrade or Vanguard aren't any more immune to going bankrupt than a bank is.
- berkle4455 4y agoA) A brokerage isn’t a bank B) It wouldn’t matter anyway you still own the shares of stocks or the bonds. They don’t magically disappear if the entity fails. C) Additionally there’s SIPC
- gadders 4y ago>>B) It wouldn’t matter anyway you still own the shares of stocks or the bonds. They don’t magically disappear if the entity fails. They don't disappear, but how can you get them in a hurry if your custodian fails?