The status of U.S. Treasuries

U.S. Treasury bonds have been considered the safest asset in the world, coupled with the strength of the United States.

However, the recent fluctuations in the international situation and the practical return of Profit in the market almost bottomed out, making it a target of ridicule.

That's why U.S. Treasury bonds are sometimes called return-free, not risk-free.

The analysis below is directly quoted from “SK Lee”'s analysis.

I didn't feel much attracted to US Treasury bonds, but by explaining the US Treasury bonds in a simpler way, it makes a little more sense.

Please understand that the example of the article may be changed and written at the request of the person involved in the analysis.

PVIF: Convert par value to present value at current market rate

PVOA: Convert coupon (interest) to present value at current market rate

PVIF+PVOA=value of bond

Discount: par value (amount received at maturity) - (PVIF + PVOA)

Discount / par value = Discount %

    Buy $1,000 worth of 10-year U.S. Treasury bonds in October, 2021 at a yield of 1.5%

    Based on the current yield of 2.35%, the par price is 925$, the value of 7.5% is Discount

    Considering inflation of 7.9%, it is valued at $874.

    In other words, the current bank interest rate is 2.35%, but the interest rate on government bonds is 1.5%. U.S. Treasury bonds are priced below par

    Collateral regulations have been strengthened since the 2008 financial crisis, and US bonds are classified as Pristine Collateral. A market structure in which commercial banks, MMF (Money Market Fund), and pension funds have no choice but to buy. In the case of US MMFs, 80% is the US Treasury bond ratio.

Absolutely safe assets, or values ​​that never change.

never, never again. Such comments and approaches seem dangerous.

Everything changes, and safe assets may actually have the most absurd internals.

Ray Dalio seems to be referring to the fact that US Treasury bonds are sometimes treated as garbage, and that the balance of power and development fuse to China may shift in the future.

If the absolute position and economic hegemony of the United States changes, it may affect the overall situation in the future.

Rather than being absorbed in one thing, today's victims can become tomorrow's perpetrators, and today's risky assets can become tomorrow's better assets.

It is good to respond flexibly, listen to the opinions of people with good eyes, and walk little by little.