I very much understand interest rate risk and yield curve risk.
The article with the link I’m providing below speaks to the sweet deal the banks are getting. One particular salient quote:
“The Fed’s low-rate policy “has been a plan to buy time for the banks to take free money and invest it, and make some kind of spread, and work their way out of the hole they were in,” said Mark MacQueen, a partner and money manager in Austin, Texas, at Sage Advisory Services Ltd., which oversees $10 billion, in a telephone interview on March 6. “Banks are trying to clean up and improve the appearance of their balance sheets and buying Treasuries accomplishes this.”
This is a rigged game with the big boys on Wall Street still being protected by the government and the taxpayer with the Fed keeping interest rates low. Meanwhile the average seasoned citizen who saved for 40 years gets 1% on CD’s. At current artificially depressed rates where’s the risk premium for the Main Street investor?
Not based on your belief that borrowing overnight at 0.75% to buy Treasuries is a risk free arb.
The 5 year Treasury now yields 0.73%. Exactly how far out do you want to go to hit this "risk free" sweet spot you feel is out there?
And if this is such a good trade, how much are the banks borrowing from the Fed to put this trade on? Give me some concrete numbers for once. Thanks.