Europe -- CDs versus T-Bills

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europeanwizard
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Europe -- CDs versus T-Bills

Post by europeanwizard » Tue Jul 04, 2017 2:21 am

From what I've read here on the board, you can put your cash in ~1 year T-Bills according to the book(s). But lots of people also put them in CDs. Are there other options? Does it matter which one you pick? In my case, I'd either get Dutch 1 year bonds, which yield -0.74% at the moment. For a one year CD, I can get +0.75%.

I can see a number of reasons to use T-Bills, for example avoiding the bank, riding the yield curve, etc. But these reasons aren't really convincing to me. Any other reasons?
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Re: Europe -- CDs versus T-Bills

Post by whatchamacallit » Tue Jul 04, 2017 8:29 am

Wow. I did not realize there were still negative rates out there. Strange times.

With a quick glance, I would use the CD as long as you are below the 100K EUR Guarantee.

https://www.dnb.nl/en/about-dnb/consume ... iestelsel/

Maybe half and half could be done for an effective 0%

Who is going to get defaulted on first. Citizens or Institutions. It is hard to know.
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jhogue
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Re: Europe -- CDs versus T-Bills

Post by jhogue » Tue Jul 04, 2017 4:07 pm

europeanwizard wrote:From what I've read here on the board, you can put your cash in ~1 year T-Bills according to the book(s). But lots of people also put them in CDs. Are there other options? Does it matter which one you pick? In my case, I'd either get Dutch 1 year bonds, which yield -0.74% at the moment. For a one year CD, I can get +0.75%.

I can see a number of reasons to use T-Bills, for example avoiding the bank, riding the yield curve, etc. But these reasons aren't really convincing to me. Any other reasons?
There is another simple option:

Cash in the PP is for liquidity, only secondarily for interest. If I was in your shoes, I would not accept a negative yield on my cash or less than 1% to tie up my money for a year. I would take 25% of my portfolio in 100 euro notes and put them into a safe deposit box until Mr. Draghi and his minions at the ECB quit trying to throttle European savers and investors.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Hal
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Re: Europe -- CDs versus T-Bills

Post by Hal » Tue Jul 04, 2017 6:44 pm

<snip>
There is another simple option:

Cash in the PP is for liquidity, only secondarily for interest. If I was in your shoes, I would not accept a negative yield on my cash or less than 1% to tie up my money for a year. I would take 25% of my portfolio in 100 euro notes and put them into a safe deposit box until Mr. Draghi and his minions at the ECB quit trying to throttle European savers and investors.

<snip>

As long as they don't try the rubbish they are discussing in Australia

http://www.news.com.au/finance/economy/ ... 2de63c170d

The newspapers here yesterday were floating the idea of having a "use by" date on physical notes.
Makes the gold allocation Harry Browne suggested to be quite wise doesn't it?

I heard they were suggesting getting rid of the $100 US notes, anything happening like that in Europe?
Any thoughts on holding Silver as a quasi-currency/liquidity?
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Re: Europe -- CDs versus T-Bills

Post by LazyInvestor » Wed Jul 05, 2017 4:49 am

What's the reason for such low yields? They seem lower than what they had even during the great depression.

I doubt it's uniform throughout the whole EU (e.g., Greece should be paying more). Why don't you lend your cash to a reasonable larger EU country which pays a more reasonable amount?
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Re: Europe -- CDs versus T-Bills

Post by jhogue » Wed Jul 05, 2017 12:09 pm

Hal wrote:<snip>
There is another simple option:

Cash in the PP is for liquidity, only secondarily for interest. If I was in your shoes, I would not accept a negative yield on my cash or less than 1% to tie up my money for a year. I would take 25% of my portfolio in 100 euro notes and put them into a safe deposit box until Mr. Draghi and his minions at the ECB quit trying to throttle European savers and investors.

<snip>

As long as they don't try the rubbish they are discussing in Australia

http://www.news.com.au/finance/economy/ ... 2de63c170d

The newspapers here yesterday were floating the idea of having a "use by" date on physical notes.
Makes the gold allocation Harry Browne suggested to be quite wise doesn't it?

I heard they were suggesting getting rid of the $100 US notes, anything happening like that in Europe?
Any thoughts on holding Silver as a quasi-currency/liquidity?
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Europe -- CDs versus T-Bills

Post by jhogue » Wed Jul 05, 2017 12:54 pm

There has been talk of phasing out the 1,000 Swiss franc bank notes. The Swiss have the highest rate of bank note usage in the developed world. One claim is that circulation of large denomination notes is due to money laundering by foreign organized crime. Some Swiss economists claim that the Swiss people are avoiding the problem of negative interest rates offered by Swiss banks by paying their bills in cold hard cash.

Personally, I do not think it is the fault of the Swiss that savers and investors like the Swiss franc better than other currencies.

See:
http://www.swissinfo.ch/eng/cash-in-a-b ... e/42424816
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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europeanwizard
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Re: Europe -- CDs versus T-Bills

Post by europeanwizard » Wed Jul 05, 2017 1:19 pm

LazyInvestor wrote:What's the reason for such low yields? They seem lower than what they had even during the great depression.
The official coupon interest is 4% or something, but these bonds are sold by the state via a tender system at tranches starting at 100K or so I read. So when I as a private investor go and buy them on the market, I pay such that the yield is negative.

(Sorry if I confused things earlier by using the wrong terminology, I'm definitely not a dyed-in-the-wool investor).
I doubt it's uniform throughout the whole EU (e.g., Greece should be paying more). Why don't you lend your cash to a reasonable larger EU country which pays a more reasonable amount?
As far as I can see, there aren't funds available that cycle 1 year bonds in and out. Going the direct route would involve extra costs because then I'd buy/sell on other exchanges than Euronext Amsterdam. I'd be open to suggestions in this regard, though.
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Re: Europe -- CDs versus T-Bills

Post by Marlb10 » Mon Jul 10, 2017 5:50 am

Why don't you invest in Mutual funds? I heard when I was doing marketing and economics in bachelors program, never place your all eggs in one bucket.
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Re: Europe -- CDs versus T-Bills

Post by Marlb10 » Mon Jul 10, 2017 5:52 am

If not mutual funds then go for different bonds, that yield differently, go invest in stock exchange and other saving schemes. Break it up, put little chunk everywhere. The major one, in which the returns are high. But please note, higher returns means higher risk. So be careful when you place your bet.
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