5% income without risks: how to invest in US Treasuries

The latest jump in bond yields was enough to scare the stock market and lead to a sell-off on March 7th. But there is also a positive side to this. Short-term treasury bonds now offer a risk-free yield of 5%, reports CNBC.

The 3-month Treasury yield reached 7% on March 5,015, the highest level since 2007. (Note: this return is calculated on an annualized basis, not a three-month basis).

Short-term Treasuries are a great way to put idle cash into action.

In addition, they can be “folded into a ladder” in order to receive a small percentage of your money for a certain period. This means that you build a portfolio of issues with different maturities and reinvest the earnings.

On the subject: Business in which industry you need to start to become a billionaire in the USA: interesting statistics

How to Invest in US Treasury Bonds (Two Ways)

1. Treasuries can be bought directly from the US government through the site TreasuryDirect.gov. To do this, you need to create an account on the site and link your banking information to it. For short-term investors every week at auction 4-, 8-, 13- and 26-week T-bills are issued. Two-year bills put up for auction monthly, and 10-year Treasury bills every quarter.

If you hold Treasuries to maturity, you are not exposed to market risk. Bonds typically pay interest twice a year. And on three-year bills, you receive interest in the form of the difference between the amount paid and the face value that you receive upon redemption.

2. Another way to purchase Treasury bonds is through a brokerage firm. This simplifies record keeping for investors. Especially if they already have an individual account in this company.

The problem is that when you buy Treasury bonds through a brokerage account, you may run into commission fees and minimum purchase requirements. Please note that you can buy Treasuries directly from the government with a minimum purchase amount of $100. But the brokerage firm may charge you for trades involving the broker. These companies often require you to purchase at least $1000 worth of Treasury bonds.

Although Treasuries are considered risk-free because their payments are backed by US government credit, investors should be aware that the real rate of return they earn could shrink if inflation rises at a rate that exceeds yields.