Bonds 4 Life: I’m Buying 30-Year Treasury Bonds at 4%

It’s been a while since 30-year Treasury Bonds have appealed to the investor inside me. When I started investing in 2019, I was getting 30-year bonds at around 3.3%.

It turns out that those were the peak rates for the next three years. Rates slowly decreased and then jumped off the ledge during the pandemic. 

Rate on the rise. However, the Federal Reserve is signaling that rates will continue to rise. The Federal Funds Rate is currently 2.25%-2.50%.

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Before moving forward, please ensure you read “The Bond Book” to comprehend how bond markets operate. I will assume you have a general knowledge moving forward. 

Let’s look at today’s yield curve. As you can see, the 2-year (3.466%) is higher than the 30-year (3.228%). This is not a typical scenario, so we call this an inverted yield curve. 

An inverted yield curve. An inverted yield curve tells us that investors are nervous about the future. They believe money is safer today than tomorrow. This metric could signal an upcoming  recession. 

Recession or not, I am buying 30-year Treasuries when they rise above 4%. Let’s examine the pros and cons of purchasing 30-year bonds at this price. Also, how do I intend to leverage these assets in my portfolio? 

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The pros of buying at 4%. Historically, a 4% yield is a little lower than average. However, I will not cry about getting a risk-free 4% yield. 

Remember, investors consider US Treasuries to be completely risk-free. If the US Government cannot fulfill its debt burden, we have bigger problems afoot. 

I aim to get a 4% yield in my dividend growth portfolio, so capturing one in bonds is excellent. Also, I may get capital appreciation in my bonds if rates travel lower over 30 years.

Bond prices go up. Did you know your bond prices can appreciate (increase) as well? Let’s say you buy a 30-years bond with a 4% yield, and rates travel down to 2%.

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If you sell your bond through the market on Treasurydirect.gov, investors will purchase your bonds at a premium. This means that you can receive capital gains from bonds. 

Of course, this math works in reverse as well. If you buy at 4% and rates travel to 6%, you’ll have to take a loss on your bonds to make them attractive to buyers. 

30-year bonds have the highest duration risk of all the treasuries. However, I am a buy-and-hold investor and don’t intend to sell my bonds. 

Understand your bond investing technique. You have to form your own bond investing approach to be successful. Bond and stock markets are a great addition to my military pension and real estate income.

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I also started a website and book publishing business to ensure I am capturing the power of compounding over time. My companies and room rentals are where I make a much higher return than 4%. 

If you only work a job and put all your money into bond and stock markets, you may be more sensitive to interest rates. Understand where you are getting your highest returns, and invest accordingly. 

The cons of buying at 4%. The highest risk of buying at 4% interest rates is duration risk. You run the risk of higher yields and your bonds decreasing in value (only if you sell).

I have never sold a bond and don’t plan on it. If you have sold bonds before, I doubt you are reading this article.

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Will I be disappointed in 20 years if I receive 4% interest on a bond and current yields are 8%? I will not be upset because I will also be buying bonds at 8%. 

To me, I just want my money to continue to grow. If 4% isn’t a high enough yield, I will go into the real world and make more money. I do not depend on economics (things out of my control) to make money for me.

The power of an infinite return. Once you understand the power of an infinite return, you’ll realize that a 4% return is truly nothing. 

I can wake up in the morning and produce a book in 4-5 hours. Publishing a book costs me nothing but time, but the returns will be infinite. Once I receive my royalties from the book, I can buy 30-year bonds to create infinite dividends (or interest in this case).

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That’s why I do not overly worry about duration risk. The actual secret of investing is adding value and seeking opportunities to build outside of the markets. Once you have created something of value, you then invest whatever income that provides. 

How I will use my 30-year bonds. I will use my bonds to hedge my dividend growth and income investing portfolios. I would have an equal amount of stocks and bonds in a perfect world, but that is unrealistic.

However, if I start accumulating at 4%, I can have a good chunk of income from my 30-year bonds. Let’s say I was earning $1,000/month in dividend income.

It would also be nice to reach $500/month in bond income. I believe this is achievable, and maybe I will accumulate more bonds later in life (I am 41 today).

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Conclusion. Bonds are a great source of income as we age. I will stay invested in the stock market until the end because I have the safety of a military pension. 

If you don’t have the luxury of a government pension, 30-year treasuries can assist you with some financial security. 

You’ll be off to the races if you can balance your 30-year bonds with a Roth IRA, HSA, Series “I” Bonds, and perhaps an automated business. 

Remember, if 4% interest is low for you, look at how you earn your money. Do you depend on interest rates and dividend yield to make your retirement successful?

YOU are your most incredible wealth generator; therefore, starting a business is the best way to guarantee a great retirement. Good Luck!

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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it.  I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing