You Have Not Missed Your Chance to Lock in Long-Term Cash At Higher Rates - 2024

US Treasury rates came down dramatically last week, with the 1-year falling from 5.32% to as low as 5.01%, with still more pronounced declines along the longer end of the curve (the 10-year, for example, crashed from 4.55% to 4.20%).

Many are suddenly wondering if they have missed their chance to lock in great rates for long periods of time.

The answer is that you have not.

Your first option is to check CD rates. I wrote on November 21, before the latest move on Treasury rates, that CDs were offering more attractive yields than US Treasury bonds even for depositors in the highest tax brackets of the highest tax locales. The good news is that - at least as of now - most banks have not lowered their CD rates. 

Check one-year CD rates here.

Check five-year CD rates here.

You may find still higher rates where you live.

Check local CD rates here.

A second option is to have a look at US agency bonds. These bonds, particularly those issued by the Federal Farm Credit Bank, the Federal Home Loan Bank and the Tennessee Valley Authority, have the same tax attributes as US Treasury bonds (interest is state and local tax exempt). If you believe that interest rates on long-term US government debt have seen their highs, these instruments may be worth a look as they offer a premium over Treasury bonds that can widen out above 100 basis points if you are willing to go out beyond 10 years. Most of these instruments are callable, but you can mitigate that risk by buying notes that are trading at significant discounts.

I caution again that agency bonds may not be appropriate for any more than very small positions.   The US government has a moral obligation to bail out these agencies if they go into default, but that has never been tested, leaving credit risk that is technically greater than US Treasury bonds. Also, while we may have seen the peak in this cycle for short interest rates, the government's debt situation could make buying any longer-term bonds here more risky.

Your third option is simply to close your eyes and start diving into a portfolio that may include CDs, Treasury bonds and perhaps agencies with different maturities now. It of course is still possible that we may have seen the peak in short-term Treasury yields, but the rates are still attractive versus where they were when 2023 began (or when any other year in the prior 15 began). If you can see past the day-to-day or even week-to-week movements, you may find that when we end 2024 hindsight will show that it was not too late to lock in now.