Reporting John Ostapkovich
By John Ostapkovich
PHILADELPHIA (CBS) — U.S. government debt is among the safest investments around, but with inflation peeking above its low yields, investors could actually lose money. However, there are reasons why they might still buy in.
Even though the stock market has risen sharply, the US still manages to sell short-term debt sometimes at interest rates of less than 2%.
According to Rutgers-Camden Finance Professor Eugene Pilotte, this is a symptom of our strange economic times.
“Typically, the interest rates will go up when the economy does well, and so the fact that they’re this low, to me, is just an indicator that people are concerned about the overall environment,” said Pilotte. “They’re actually willing to pay to have somebody hold their money for them, rather than put them in something risky.”
Professor Pilotte said there are some inflation-protected Treasury securities, but their interest rate is even lower.
You can get higher interest from municipal or corporate bonds, but there’s added risk for that promised added reward.>