MFOHome About Commentary Discussions Funds The Best Resources Support Us!

Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

Sign In Register

Categories

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Roll Breakeven Yield

yogibearbullyogibearbull
edited June 2023 in Other Investing
ROLL BREAKEVEN YIELD

What is the tradeoff between buying x-yr now and roll vs buying 2x-yr now?
Yield for x-yr now = ix%
Yield for 2x-yr now = i2x%
Roll Breakeven Yield for x-yr in x years = iroll%

The Roll Breakeven formula is:
iroll = 2*i2x - ix

Example: T-Bill 1-yr vs T-Note 2-yr, 6/11/23
1-yr 5.17%
2-yr 4.59%
Roll Breakeven 4.01%

So, if YOU think that 1-yr will be higher than 4.01% in 1 year, buy 1-yr T-Bill now and then roll; if YOU think that 1-yr will be lower than 4.01% in 1-yr, buy 2-yr T-Note now. So, YOU don't have to look for what the others in the media are saying.
https://ybbpersonalfinance.proboards.com/thread/456/roll-breakeven-yield

Comments

  • Sven
    For taxable account we keep rolling our 3 mo and 6 mo ladder. Not sure when the yield curve will be like a year from now. However, the longer end of the curve is gradually rising. Have been watching the 2 mo-10 yr spread.
Sign In or Register to comment.