The League That Broke the Internet

The Treasury website continued to crash as investors rushed to buy government bonds.
The Treasury website continued to crash as investors rushed to buy government bonds. Andrea Hsu

Last week I saw a headline that stopped me in my tracks: Low T-Bills are suddenly sexy. Yes, treasury bills! I have never seen – in over 15 years of covering business and economics – the words “sexy” and “Treasury bonds” in the same sentence.

And for good reason. In the world of investments, T-bills will never be considered exciting. It could be a technology or crypto stock or maybe NFT. Treasuries will be those who wear reasonable shoes, drive below the speed limit and shop at Costco.

said Alexis Leondis, who wrote the stop title and the article that goes along with it for Bloomberg: “And I’m like, ‘They’re not that way anymore. They deserve a second look. “Leondis is not wrong. Government bonds (AKA treasury bonds, treasury bills, treasury bills) had a really cool glow. Reasonable shoes and everything.

One deed in particular, and Series 1 savings bondswhich has become so popular, potential buyers took down the Treasury’s website last week (TreasuryDirect.govwhere you can buy bonds). What’s going on? What happened to government bonds to make it exciting?

Bond Anatomy

A bond is basically a loan. You loan the government, say, $100, and after the bond matures (in 4 weeks, 6 months, 10 years etc., depending on the bond you buy) the government will pay you, plus a little interest.

US government bonds are one of the safest investments in the world, with basically no risk. Also, basically zero bonus. “Until recently, I think the word ‘boring’ would be perfectly accurate to describe Treasuries,” Leondis said. “And for most people, it’s not really worth watching because the rates were so low. Like, less than 1% is kind of low.”

For 4-week bonds, in January the government was paying a yield (interest payment) of about 0.05%. This means that if you invest $100 in a four-week bond in January, you will get back $100.05 at an annual rate. Nickel your problems.

Today, though, it’s a different story. Currently, the 4-week bond pays out approximately 4%. Nearly 80 times the return to investors.

Across the board, government bonds give investors the best payouts they’ve seen in years: 4%, 5%, 6%. That’s a lot better than the return you’ll get in the stock market now (the S&P 500 is down about 20% so far this year), although it’s still not enough to keep up with inflation.

The League That Broke the Internet

Which brings us to the link that broke the internet: I Savings Bond Series. These are government bonds that are adjusted for inflation and pay an annual interest rate of over 9.6%. The deadline for locking in that rate was Friday, October 28 (after rates had fallen to about 6%): hence the malfunctioning website.

TikTok, Instagram, and YouTube are filled with financial advisors directing people to go to the Treasury website as quickly as possible and buy bonds.

My fellow NPR reporter Andrea Hsu and I decided to take this advice seriously. We thought we’d get our money together and jump on the bond issue.

Series 1 savings bonds required a six-month commitment, so Andrea and I started smaller with the cheapest bond out there: a 4-week bond, which we split: $50 each. We tried logging into the Treasury website a few times, but got one error message after another. “I’m a little worried,” Andrea said a few minutes later.

“It’s getting too hot…”

According to David Ena, who covers government bonds for Tipswatch.comThe crash of the TreasuryDirect website and people vying for bonds as if they were tickets to a Lizzo gala is very new.

“These are things that are never normally paid attention to,” Ina explained. “Why is the direct treasury closed? Because everyone is trying to buy bonds at the last minute. It’s getting very hot.”

too hot. Words that have never been used literally to describe US government bonds.

Alexis Leondis of Bloomberg said the reason Treasury bonds are glowing is twofold: First, they are paying a lot more than they once were. And second, although you could argue that there are plenty of governments around the world that pay similar yields for their bonds, the United States is in a special place. The high payments on US government bonds – considered the safest investment – are unique.

I’ll take my boring links, thank you

Usually, you don’t want government bonds to be exciting or to pay a lot of interest. Government bonds usually only pay so much when the economy appears to be unstable or on the verge of collapse, and for this reason, investors are reluctant to buy these bonds because there is a very real risk that the country will not be able to pay. Back. But that’s not what’s going on here, said David Ena. “It’s the Fed,” he emphasized. “This is the reason for all this.”

The Fed, as part of the coronavirus stimulus, was buying billions of dollars in government bonds every week (it was a way to keep money flowing through the economy). The Fed pretty much stopped doing that, which led to a very, very sudden drop in demand for government bonds.

At the same time, big buyers such as China and Europe have slowed purchases of US government bonds due to their economic problems. The result: overall demand for US government bonds has fallen a lot, but not because the US is seen as a riskier bet.

Golden moment for investors

This convergence of events has created a kind of golden moment for investors: people can make a decent and predictable return on an investment that is not really risky. There are not many investments that can promise this at the moment.

Andrea Hsu and I tried dozens of times throughout the day to buy our bond. The site crashes over and over again. At about 6 pm. I finally managed to get to the purchase page. I called Andrea right away. “I’m so excited!” She said. “Let’s do it!” “here we are!” I said and hit the send button. The site crash.

Andrea Hsu and Stacey Vanek Smith are reacting to the disruption of the Treasury Direct website, just as they are processing their bond purchase.
Andrea Hsu and Stacey Vanek Smith are reacting to the disruption of the Treasury Direct website, just as they are processing their bond purchase. Andrea Hsu

By 9 p.m., after 11 hours of trying, morale was low. “I’m not optimistic anymore,” Andrea said. “About, around, around,” I said, referring to the spinning wheel that the browser displays when the page is loaded. “I think the bonds broke me.” The site is down again.

Treasury bonds are all that

according to Bloomberg Alexis Leondis, the current payments that government bonds give investors may be closer to normal than we’ve seen in years. She says the last 10 years of US government bond repayments almost nothing is probably an anomaly.

“I think we have to change our view,” she said. “Maybe we’re getting into a more normal place.” Leondis noted that bond payments have been low, in large part due to the Federal Reserve buying our bonds, keeping supply low.

Also, years of near-record interest rates have penalized people trying to save money. “I have long said that savers have really suffered under the Fed,” said bond watchdog David Ena.

Ina said that having a safe place to put money where there is a guaranteed return is like a life raft for people on a tight budget, especially with inflation killing the value of our money. “It’s a big deal for a lot of people, especially retirees who have to sit on the cash.”

Which brings us to the shocking title: Government Bonds Are Exciting! BloombergAlexis Leondis of Alexis Leondis pointed out that rather than this attraction coming from some kind of extreme change, it is in fact more than It’s all this A moment, where our hero simply took off his glasses, put on a fancy costume and finally shone like the star he always has been. The fact that government bonds are finally paying a meager yield simply highlights the safety and security they have long provided. “They’re like, I’ve been here the whole time,” Leondis laughed. “Bonds have been here the whole time.”

Andrea Hsu and Stacey Vanick Smith were able to buy their bond at 10pm
Andrea Hsu and Stacey Vanick Smith were able to buy their bond at 10pm Stacy Vanick Smith

For me and Andrea Hsu, popularity was often painful. It was like waiting in line for hours outside the most prestigious club in the world. At 10 PM, our bond purchase finally took place. For $100 and 2 days of frustration, we’ll make a profit of just under $4. Although, Andrea indicated that this will be an annual profit and we plan to cash it out in 4 weeks… truly The profit will be closer to $30. However, it looks like we were the lucky ones. The Treasury issued a statement saying that due to the massive demand, many potential bond buyers were unable to access it. Government bonds had to turn people away at the door.

Where’s the velvet cord when you need it?

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