Time To Sell Your Treasuries, But Can You What Price Will You Get & What s Really Liquid

Can you really sell your treasuries if you need to? How liquid are they? Hello Diamondestic members, Supersavers, and Quartz fans. I hope you're healthy and well and welcome back to a weekly update. So, at least several times a week, we get emails and news articles about the Sell America trade. Now, if you're a regular on this channel, you know that Marcus and I believe in the long-term growth of this country, regardless of short-term blips and uncertainty in the market. As long-term investors, we do not fall into this Sell America camp. As a Diamondnestic regular, you will also know that when it comes to the debt that our country issues, U.S. treasuries, and bonds in general, we are strong advocates of buying and holding to maturity for the average retail investor. That said, life happens, circumstances change, and there might come a time when you may need or even want to sell off parts of your fixed income portfolio. For example, when interest rates go down and the price of your treasuries and other bonds go up, you may want to lock in some of those paper gains. But, will you really be able to find a buyer quickly that will pay you a good price? So, with that in mind, here are the three topics that we'll be covering today. One, can you really sell your treasuries if you need to? How liquid are they? In this section, we'll be comparing T-bills, T-bonds, and tips. Two, how do current rates compare for treasuries and annuities? And three, what are the predicted yields for the upcoming week's treasury auctions? The two, five, and seven-year treasury notes are on the auction schedule this time around. Let's dive in now, folks. Can you really sell your treasuries if you need to? How liquid are they? As many of you have heard me say before, U.S. treasuries, as a general category, are considered to be the most liquid fixed income investment in the world. U.S. treasuries had an average trading volume of about $1 trillion for every day that the market was open, as SIFMA, the Securities Industry and Financial Markets Association, reports for the third quarter of 2025. This is the latest data available at the time of this taping. Or seen in a wider perspective, treasuries accounted for more than dominating 71% of the total trading volume in the U.S. bond market. There is a catch, though, if you're considering investing in TIPS, Treasury Inflation Protected Securities. TIPS are treasuries, and as such, backed by the full faith and credit of the U.S. But they accounted for only 1.9% of overall trading in treasuries over the same period. This 1.9% translates into a still respectable $19 billion of average daily trading volume. But institutional investors and other market participants who buy and sell large volumes of treasuries every day often complain that there is less liquidity in TIPS than for other treasuries. And what they mean is that they see higher bid-ask spreads for TIPS. In other words, that they have to pay more when they buy TIPS and receive less when they sell TIPS in comparison to other treasuries. That's true in principle, but let's take a closer look at how large or small the difference actually is. At the time of this taping, the bid-ask spread for this T-bill on top of Fidelity's treasury screen was 1 tenth of a basis point, 99.950% versus 99.951% of face value. And for the next T-bill, the bid-ask spread is 2 tenths of a basis point, 99.930% versus 99.932%, assuming that you are trading at these higher volumes. These bid-ask spreads might well be the lowest for any product anywhere, supporting the argument that treasuries are the most liquid investment on the globe. But let's compare these very narrow T-bill spreads to TIPS now. The TIPS that happened to be on top of Fidelity's screen has a spread of 2.8 basis points, 99.660% versus 99.688%. And the next one, 4 basis points, 99.9% versus 99.94%. So yes, TIPS are noticeably less liquid if we compare them to T-bills. 2.8 or 4 basis points for TIPS versus 0.1 basis points for the T-bills we just showed you. But 2.8 or even 4 basis points in bid-ask spread for TIPS isn't really that large either if we look at the absolute numbers. So, the lower liquidity of TIPS may not be really relevant to retail investors like you and me. Please note that the numbers we just shared with you should give you a feeling for the difference in liquidity between T-bills and TIPS, but spreads change constantly and may be higher for both T-bills and TIPS that are less frequently traded. Also, these quotes that we just looked at were for larger amounts, but most of the leading brokerages do offer trading capabilities for TIPS in small retail sizes as well, usually starting from $1,000. So, to get a sense of what this all means if you ever want to sell your TIPS in real life, let's look at this small TIPS position here in my Fidelity account that I purchased a while ago for a TIPS tutorial on this channel. My cost basis for this TIPS is $984.74 and it's now worth $846.01 only per Fidelity, which means I am sitting on a paper loss, a mark-to-market loss of $138.73 at the time of this taping. Good thing I only purchased $1,000 but this is a TIPS that will mature in February 2053 only and with a real yield of 1.5%, which is below current auction results for the 30-year TIPS that are more in the mid-2% range. This price discount in the market doesn't really come as a surprise. This is yields up, prices down at work. Let's pretend now that I decide not to wait for the TIPS to mature in 27 years to get my full inflation adjusted principle, but rather I want to cut my losses by selling this position and potentially reinvesting the money into something more lucrative. What price would I get? Well, here's the quote that Fidelity gives me. I would get $859.05 for my TIPS, including $7.12 of accrued interest, even a bit more than the $846.01 that they showed me on the current value screen before, but of course still less than my cost base of $984.74. So I would be taking, crystallizing my paper loss as the traders say, which I don't want to do at the moment, so I won't hit the actual trade button now. But back to my main point. Yes, TIPS are not as liquid as other treasuries in principle, but if you're a retail investor, you should be able to sell them in a reasonable amount of time and at a more or less reasonable price via one of the leading brokerages, such as Fidelity or E-Trade, if you ever wanted or had to, even in small amounts as we've just shown you. So the lower liquidity and higher bid ask spreads don't really play that much of a role in my personal decision making for or against TIPS. The lower liquidity of TIPS is really relevant for large and active traders only, as they may not get the same super tight, potentially even less than one basis point bid ask spreads that they could get for well-traded t-bills, t-notes or t-bonds. That said, TIPS are complicated bonds and their tax treatment is not always straightforward, especially if held in a taxable account. And that's why, liquidity aside, I still generally view TIPS as more suited for buy and hold to maturity investors. Now, let's talk briefly about the 20-year treasury bond, because this is another one that often gets put into the category of less liquid when it comes to treasuries. As you can see from the 20-year t-bonds that we pulled from Fidelity at the time of this taping, the bid ask spread for this maturity ranges between This 3-4 basis point bid ask spread for the 20-year t-bond is higher than the 1-2 basis point spread you would normally be able to find for a well-traded and more liquid 10-year t-note or 30-year t-bond. But again, in our view, as with TIPS, unless you're an institutional investor or someone looking to move significant volumes, this lower liquidity of the 20-year t-bond should not impact you all that much. So, now that we've shown you why treasuries are considered the most liquid fixed income investment in the world, even TIPS and the 20-year t-bond are quite liquid for all practical purposes for a retail investor. Let's move on to the next part of today's discussion for those of you who are interested in locking in some of the current rates on the longer end. How do current rates compare for treasuries and annuities? As we normally do at the end of the week, let's compare the annuity and treasury rates at the time of this taping. For this comparison, we'll focus specifically on rates for multi-year guaranteed annuities, MIGAS, from a AA-plus rated insurance company that we work with. AA-plus is the best credit rating that an insurance company can get from AMBEST, which is a ratings agency that specializes in the insurance industry, meaning the lowest risk, making the MIGA rates that we're about to cover most comparable to treasuries in terms of risk return profile. And remember that MIGAS work essentially like a CD, similar to a bond, except that MIGAS do not pay interest regularly but accumulate it in the MIGA account and pay out everything together at maturity. So, let's begin with some sample rates for MIGAS. Here you have the investment amount for each investment range, from $10,000 all the way up to just under $10 million. And here's a rate for a two-year MIGA, three-year MIGA, and so on, all the way up to seven years. For example, if you were to purchase a $10,000 seven-year MIGA at the time of this taping from this AA-plus carrier, your rate might be 4.35%. A $50,000 seven-year MIGA might earn you 4.45%. A $100,000 seven-year MIGA might earn you 4.6%. And a $1 million MIGA might earn you even 4.65% for seven years. And if you have more than the amounts shown here, say north of $10 million, your rate might go as high as 4.75% with this AA-plus insurance carrier this coming week. So, the two-year, three-year, four-year, six-year, and seven-year terms have not moved since last week, whereas the five-year term has gone up by another five basis points. That's a 20 basis point move upwards in two weeks for the five-year. Remember that annuity rates track interest rates, which means that annuity rates, like interest rates, are still at above average levels when you compare them over the most recent 20-year period, despite short-term rates having come down in recent months. Also, keep in mind that the MIGA rates in this table are subject to change at any time without prior notice, and that your personal rate may be higher or lower depending on a number of factors. The factors that may influence your personal rate may include how strongly or not so strongly the insurance company you're buying your annuity from is rated, meaning how risky or not risky your insurance company is. As a general rule of thumb, though, and all else being equal, the higher the rate, the lower the credit rating of the insurance company, similar to bonds. Your personal rate will also depend on your investment amount, your annuity type and term, your state of residence, and other specific circumstances. Your personal rate is not fixed before you sign your annuity contract. Now, let's move on to treasuries. There's usually a $1,000 minimum for treasury transactions with most leading brokers, like Fidelity, Schwab and Vanguard. Treasuries are more liquid than MIGAs because you can sell them before maturity on the secondary market at whatever the then prevailing market price may be, as we discussed in the previous section. Do note that MIGAs usually only allow you to withdraw some part of your capital per year without penalty, for example, 10%. This liquidity advantage of treasuries over MIGAs is also one of the main reasons why treasury rates are normally lower than MIGA rates. As this table shows, the rates on treasuries range from as low as 3.6% for a two-year term up to 4.03% for a seven-year term. Last week's update was the first time the seven-year treasury moved above 4% in a long time, and it appears to have been able to hold its ground this week. And what we continue to see here is that for a two-year term and for amounts under $100,000, you're now a bit better off with the treasury than a MIGA with this top-rated insurance carrier. For a two-year term for amounts $100,000 or more, MIGAs are paying slightly more than the treasury, but I'm not sure the yield difference would be enough for me to compensate for the lower liquidity. For anything longer than two years, the MIGA rates continue to win over treasuries, and more substantially so the further out you go and the more you invest. So, if you're comfortable with the illiquidity of MIGAs, their lack of regular interest payments, and the possible early withdrawal penalties before the term ends, or before you turn 59.5, and you want to lock in these MIGA rates for the long run, or if you're considering an annuity for the principal protection and guaranteed lifetime income that they can offer, now may be a good time to reach out to your trusted annuity specialist. Annuities come in many different flavors. As I explained earlier, MIGAs, multi-year guaranteed annuities, work essentially like a CD, similar to a bond, except they do not pay interest regularly, but accumulate it in the MIGA account and pay out everything together at maturity. Whereas FIAs, fixed indexed annuities, allow for potentially higher market-based returns tied to the S&P 500, for example. FIAs come with full principal protection, but also with an upside cap, and might be something to consider if you want to stay in the stock market for the high returns, but are concerned that we're headed towards a market correction. The first-year cap on a seven-year FIA for amounts $100,000 plus still stands at an attractive 9.25% at the time of this For a seven-year cap that stays the same for the life of the FIA, that number also continues to be worth a look at 7.25%. There are also SPIAs, single premium immediate annuities, which can offer an immediate stream of lifetime income and fixed payments. And QLEX, qualified longevity annuity contracts, which are generally used to lower required minimum distributions, RMDs, defer taxes, and manage longevity risk if you have pre-tax retirement savings. You can check out these annuity videos here, or link below this video, if you want a deeper dive into who should buy Amiga, some other type of annuity, or no annuity at all. Or shoot us an email at jenniferdiamondnesic.com so that we can connect you with our trusted annuity specialists to see what your options may be, because there's no cookie-cutter, one-size-fits-all annuity solution. Any annuity you purchase should be customized to your individual circumstances, goals, and expectations, and fit properly in your overall portfolio, regardless of size. Moving on now to a usual table with Treasury yields from this past Friday versus the previous week, across all the maturities that the Treasury issues at auction. This last row here shows the increase or decrease in rates over the past week. Increases in rates are shown in black, and decreases in rates are shown in red. So, despite a fair bit of movement and noise during the week, Treasury yields ended the week basically unchanged from a week ago, mostly zero and one basis point changes across the entire maturity spectrum. These four basis points for the two months is the largest difference we can see. I think it's fair to say that that's not what most commentators were expecting at the beginning of the week. It confirms once more that markets remain hard to predict for everyone without a crystal ball. Now, let's take a look at Treasury yields from this past Friday versus a year ago on January 2nd, 2025. As before, this last row here shows the increase or decrease in rates since the beginning of 2025. And again, increases in shown in black, and decreases in rates are shown in red. Given the few basis point changes this week across the maturity spectrum, the yield picture versus the beginning of last year is similarly unchanged as well, which is to be expected. Yields are down across the board, with the single exception of the 30-year, which is still hanging on at a small three basis points higher. There will be a Fed meeting this coming week on January 28th, but markets are betting that rates will remain stable. At the moment, the CME Fed watch tool shows a probability of over 97% that rates will remain at the current level of 3.5% to 3.75%. But who knows, right? There's so much that could happen from the long-awaited Supreme Court decision on whether the International Emergency Economic Powers Act, the IEEPA, was sufficient to give President Trump the authority to impose his Liberation Day tariffs to more new initiatives from President Trump. As always, stay tuned for more. Keep in mind that these numbers give you a general feeling for where rates currently stand along the maturity spectrum. The yields that you may get when you buy at a specific auction, or from a specific broker, or when you sell, will likely differ a little bit from what's shown here. You can find more details on these treasury rates for any day of the week that the bond market is open on the Treasury's Daily Treasury Par Yield Curve rates page. All sources are linked below in the first pinned comment. So, now that we have a good overview of where treasury and annuity rates ended the past week, let's move on to the next section of today's discussion. What are the predicted yields for the upcoming week's treasury auctions? If we go to Treasury Direct's upcoming auctions page, we can see that the 13, 26, 6, 17, 4, and 8-week T-bill auctions are happening as usual. And if we scroll down, we can see that the 2-year T-note, the 5-year T-note, and the 7-year T-note auctions are also on the schedule. The 2-year floating rate note will also be auctioned off this coming week. At the time of this taping, on Fidelity's platform, here's where the expected yields stand for the T-bills that have been announced already. The 6-week at 3.671, the 13-week at 3.628, and the 26-week at 3.575. For the 2-year T-note, the expected coupon is 3.5, and the expected yield is 3.58. For the 5-year T-note, the expected coupon is 3.75, and the expected yield is 3.836. And for the 7-year T-note, the expected coupon is 4%, and the expected yield is 4.019. Keep in mind that all of these numbers can and usually do change all the way up to the time of the auction. All right, Diamonestic members, I hope you enjoyed today's video and learned something new. And as always, if you're interested in continuing the conversations with me, Marcus, and our Diamonestic members on the upcoming week's auctions, or just other safe ways to generate additional income in 2026 beyond what treasuries and annuities can pay, either via corporate bonds, high-yielding bond funds, covered call strategies, preferred shares, and other investment vehicles, I'd like to invite you to come join our private VIP Investment Club, where we will be wrapping up our four-part member series on corporate bond investing shortly. Remember, our Diamonestic VIP Investment Club is the ideal place for you if you want to, one, have an extra pair of eyes for critical investing questions. Two, get ready for the retirement decisions that lie ahead for yourself or a loved one. Three, understand how a product works, its benefits, and its risks. Four, be the first to know about safe and or higher-yielding investments. Five, spot and clearly understand new market trends and issues. Six, exchange perspectives with a like-minded community. And or seven, continue your lifelong learning about investing and retirement. If you fall into one, some, or all of these categories, visit our website at www.diamonestic.com and click on this yellow Private VIP Investment Club button to learn more. And see you again very soon with more brand new wealth-building content for your financial journey.