The Yield Curve Presents a Sweet Spot By Tom Graff About this article: Every once in a while, the market gives you a trade with a lot of outs, something that can work for a variety of reasons. I believe that owning shorter, high-quality bonds vs. longer bonds and/or cash is one of those trades. The yield curve slope is currently very steep between cash securities and both two-year and five-year bonds. In other words, the yield differential garnered by moving from cash to two-to-five-year bonds is significant. In the Treasury market, one-month T-bills yield about 1.25%, whereas two-year bonds yield about 2.30% and five-year bonds about 3.05%. In "government" agencies, one-month yields are in the 2.20% area, vs. 3.20% for two-year bonds and 4.00% for five-year bonds. In tax-exempt municipals, cash-equivalent bonds yield about 1.35% right now, vs. 2.50% for two-year securities and 3.17% for five-year bonds. In order for the cash-equivalent bond to outperform two-year bonds... Or, call us at 1-866-321-TSCM (8726) Monday-Friday, 8 a.m.-6 p.m. ET. Outside the U.S. and in Canada, call 1-212-321-5200.

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