‘Bond ladders are cool again,’ says advisor. Here’s how to capture higher Treasury bill yields

If you’re eager to capture higher yields amid rising interest rates, you may consider a Treasury bill ladder, depending on your goals, according to financial experts.

Backed by the U.S. government, Treasury bills, or T-bills, are widely considered a relatively safe asset, with terms of four weeks to 52 weeks. You receive the interest when the T-bill matures. 

The ladder strategy includes several T-bills with staggered maturities. When one expires, you can reinvest the funds for a higher yield, which may be appealing as interest rates rise. Or you can allocate the proceeds elsewhere.

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“Bond ladders are cool again,” said Jeremy Keil, a certified financial planner with Keil Financial Partners in Milwaukee, who is currently looking at T-bill ladders of four months, eight months and 12 months. 

Over the past year, T-bill yields have increased after a series of interest rate hikes from the Federal Reserve — and there may be more on the horizon. As of Feb. 27, six-month and 1-year Treasury bills were both paying over 5%.  

Keith Singer, a CFP and president of Singer Wealth Advisors in Boca Raton, Florida, said there’s currently an inverted yield curve, meaning some short-term Treasurys have higher yields than longer-term ones. 

“The market is expecting rates to go down,” he explained. Based on what’s known today, the yield curve suggests that inflation will cool and the Fed will eventually start cutting rates, he said.

You can buy T-bills through TreasuryDirect, a website managed by the U.S. Department of the Treasury, which allows you to automatically reinvest into the same term. Or you may purchase T-bills through a brokerage account, which offers more liquidity and flexibility.