4 ms·

They are also illiquid for 3 months. A savings account is for more liquid savings

tombert 3y ago
I could be wrong, but I thought you could sell T-Bills fairly easily on the secondary market. You might take a bit of a haircut, so it's obviously better to hold onto until maturity, but I think in a pinch you can get most of the money back.
- throw_nbvc1234 3y ago
  Or you can be SVB and take a lot of a haircut. Putting money you "need in a pinch" in an asset where you could take a haircut to get an extra percent or two of interest is a risk. A risk you can mitigate but still a risk.
  - emkemp 3y ago
    SVB's haircut was from LONG TERM bonds. Not T-Bills.
    - tombert 3y ago
      I was about to say; if the bonds were going to mature in less than three months, I doubt that the haircut would have been nearly as substantial; I don't know that it would have been enough to save them but at it wouldn't be as cartoonishly awful as it was.
- TradingPlaces 3y ago
  Short term rates are still rising, and you will lose money if you sell early. There is risk. There is no risk in a US savings account under $250k
  - tombert 3y ago
    Oh, no argument there; it's about risk management in my mind. How often do financial emergencies happen? How often do I need to dip into long term savings? If I do have to dip into long term savings, how much of a haircut am I willing to take? The answer to these questions are going to be different for each person and I obviously cannot answer them. What I'm trying to say is the money isn't wholly illiquid.
  - koolba 3y ago
    Sure there's some interest rate risk to short term treasuries but the real world risk rounds pretty close to zero. Plus it lessens as it matures. In the current situation with the 3m at 5.125%, if you were the most unlucky investor in the world and bought it today, and the Fed immediately announced they're raising target rates by %1, and the market actually immediately responded with a commensurate %1 increase in the market rate, and you had to liquidate your position immediately for cash, you'd be down about 0.2375%. A more realistic 25bps (i.e. .25%) rate hike would be .0605%. And again that's if it happens at exactly the moment after you've acquired the treasury. For every day that passes, the time to maturity shortens even further, so the current price impact to any interest rate change would lessen as well. If you know you need the cash then yes keep it in a savings account. But if you're unsure, you could a lot worse than buying 3-month T-bills.
koolba 3y ago
US treasuries are marketable securities. The 1-month and 3-month ones the most liquid asset on the planet. Also US treasuries have the unique property of being explicitly 100% guaranteed by the US government so no $250K limit to worry about.

I could be wrong, but I thought you could sell T-Bills fairly easily on the secondary market. You might take a bit of a haircut, so it's obviously better to hold onto until maturity, but I think in a pinch you can get most of the money back.

throw_nbvc1234 3y ago
Or you can be SVB and take a lot of a haircut. Putting money you "need in a pinch" in an asset where you could take a haircut to get an extra percent or two of interest is a risk. A risk you can mitigate but still a risk.
- emkemp 3y ago
  SVB's haircut was from LONG TERM bonds. Not T-Bills.
  - tombert 3y ago
    I was about to say; if the bonds were going to mature in less than three months, I doubt that the haircut would have been nearly as substantial; I don't know that it would have been enough to save them but at it wouldn't be as cartoonishly awful as it was.
TradingPlaces 3y ago
Short term rates are still rising, and you will lose money if you sell early. There is risk. There is no risk in a US savings account under $250k
- tombert 3y ago
  Oh, no argument there; it's about risk management in my mind. How often do financial emergencies happen? How often do I need to dip into long term savings? If I do have to dip into long term savings, how much of a haircut am I willing to take? The answer to these questions are going to be different for each person and I obviously cannot answer them. What I'm trying to say is the money isn't wholly illiquid.
- koolba 3y ago
  Sure there's some interest rate risk to short term treasuries but the real world risk rounds pretty close to zero. Plus it lessens as it matures. In the current situation with the 3m at 5.125%, if you were the most unlucky investor in the world and bought it today, and the Fed immediately announced they're raising target rates by %1, and the market actually immediately responded with a commensurate %1 increase in the market rate, and you had to liquidate your position immediately for cash, you'd be down about 0.2375%. A more realistic 25bps (i.e. .25%) rate hike would be .0605%. And again that's if it happens at exactly the moment after you've acquired the treasury. For every day that passes, the time to maturity shortens even further, so the current price impact to any interest rate change would lessen as well. If you know you need the cash then yes keep it in a savings account. But if you're unsure, you could a lot worse than buying 3-month T-bills.

koolba 3y ago

US treasuries are marketable securities. The 1-month and 3-month ones the most liquid asset on the planet. Also US treasuries have the unique property of being explicitly 100% guaranteed by the US government so no $250K limit to worry about.