Don’t treasury bill values fluctuate, so you could lose some principal if you sell before the end of the term? It seems too risky to hold treasury bills if you want only a 4 month or 1 year holding period. If fewer investors buy treasury bonds at auction, making the price go up, you are compensated with a higher yield at maturity, but who wants to hold treasury bills for 10 or 30 years? This is why I have not bought treasury bills before, but perhaps I am wrong?
Chris, when you say the bond market rallies, you are talking about the 30 year bond price increasing, not about the yield increasing (i.e. lower price). That’s what caught me off guard when we discussed this yesterday, because in the newspaper, they talk about the yield not the price. As long as the oil price stays high, and the oil nations have so many dollars to invest in treasury bills, the bond will keep rallying. But this is offset by declining imports as consumer spending slows, and that would lower bond prices. Which side will win: rising oil prices or declining goods? There’s an economic boom in the Middle East, as the high oil prices are really enriching them. If they do as China does, i.e. print money so they don’t have to convert the dollars into their own currency, then they have to return the dollars to the US to invest, and where to put it? – US treasury bonds.
