Juicy Cash Ideas to Consider Now

In the final week of 2022, the Federal Farm Credit Banks, an agency with an implied Treasury guarantee, sold one-year bonds with an interest rate of 4.75%.

In December 2021, the same organization borrowed for one year at 1.06% and for nine years at 2.00%. The one-year deal was fair at the time, as 90-day T-bills were at 0.17%. But the 2.00% bond due at the end of 2030 now trades at 83, representing a price 17% below its original par value. That's the difference between a cash equivalent where you have limited risk to principal due to the short time frame-and an IOU with a long-enough maturity (duration) to get you in trouble.

Longer duration is back in favor, and the price cut on that 2% Farm Credit bond (now an eight-year note) boosts its yield to 4.6%, assuming it's held to maturity. But the low coupon means the current yield, or what you'll earn in annual income, is just 2.4%-unappealing for income-first investors. There are scads of similar listings: deeply discounted principal for a fine long-term trade, but scant immediate income and a long wait for the full return of capital.