T-Bill Ladder at 0% Yield?

Would I consider building a T-bill ladder with a yield of 0%? In a word, no. Never. However, there are some folks out there who are doing just that, buying US Treasury Bills at an interest rate of 0%. Back in March when I first wrote about T-bill ladders, I mentioned not starting one right now because the yield was so low. At the beginning of this year on Jan. 2, 2008, the 4 week was yielding 3.09%. On Nov. 28, 2008, the 4 week was yielding 0.02%. Incredible. I had no idea they would fall this low. Why would anyone ever accept a rate of 0% or in some cases even a negative yield? Well, this NY Times article does a good job of explaining why it’s necessary for some entities to do just that. All I can say is it’s probably going to be a good long while before my portfolio diversifies into the area of T-bills again. And, it’s really easy to fund public works programs under Obama when you can borrow money at 0%. Now, if they’d only let me renegotiate my mortgage at that rate.

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  • Geoff

    It all depends on your age at this point. If you’re close to retirement, it does make sense to ladder, even at less than 1% return, especially if you’re freaking out at want to reallocate your retirement portfolio. Yeah, you’re taking a big hit on the front end because of market losses, but at least those investors would be assured that their assets would not disappear in the next couple of years. If you’re got a couple years to wait though, you’re right it makes absolutely no sense at all.