There will be 260 Fed meetings between the issuance and maturity of a 30-year Treasury bond. That is 260 times when the Fed raises, lowers, or does nothing with its Fed funds rate.
Why should a 30-year bondholder care what the Fed does at the next meeting or the following few meetings?
Q1 2023 hedge fund letters, conferences and more
I ask the question because I get many inquiries from potential bond investors on whether they should buy bills, notes, or bonds based solely on expected Fed policy.
Many inquiries are concerned about buying bonds too soon because they fear the Fed may still raise rates once or twice. While the Fed is an important variable in the performance of all bills, notes, and bonds, its actions significantly impact shorter-term bills and have less influence on longer-term notes and bonds.
To better appreciate what drives yields across the spectrum of Treasury securities, I share some evidence on which factors influence bill, note, and bond yields. This exercise will assess which maturity bond will best serve your needs while effectively reflecting your economic and Fed outlook.
For a refresher on bond basics, I recommend reading my article Treasury Bonds FAQ and watching my YouTube appearance, Bonds Explained Simply, with Adam Taggart of Wealthion.
Bond market lingo
Before moving on, it’s worth a quick review of what constitutes bills, notes, and bonds.
Bills encompass all securities issued with a maturity of one year or less. They are sold at a discount to par and do not pay a coupon. Bill investors instead receive the difference between the purchase price and par at maturity.
Read the full article here by Michael Lebowitz, Advisor Perspectives.
