Guarantee of investment return violation for treasuries ?

CFA Level III
#1

Is it a violation to guarantee investments return in case of treasuries instruments?

#2

If it’s an AAA rated then no, if it has something like below investment grade rating then yeah maybe. It’s an opinion not a fact (since it has a chance of default).

#3

Treasuries do not have credit risk therefore no default risk. Other investments with credit risk have the possibility of default and this risk should be picked up in the yield spread. This does not gurantee a return though, the value can change with a shift in rates.

#4

Treasury notes with coupon have reinvestment risk maybe we can’t guarantee a specific return

#5

Do not guarantee a return.

Period.

#6

Exactly - although there is no credit risk, there are other risks - someone said reinvestment risk, which is completely feasible, risking that YTM is not earned should rates change accordingly (and the bond is not immunzed ha). Listen to the magician…never guarantee return. I think that’s the bototom line.

#7

Definitely a violation. The only thing guaranteed is principal and interest from Uncle Sam. If you bought a US 30 Yr Bond and rates jumped 1% you’d be sitting on quite a loss. Now that situation would be somewhat irrelevant if you held the bond until maturity, but your short-term return wouldn’t be close to the expected long-term return that you “guaranteed”.

You can lose money with treasuries guys. It’s not all about credit risk…

#8

Even for Treasuries there’s event risk.

Don’t guarantee anything.

#9

Even cash under the mattress isn’t guaranteed (it can be stolen or burnt in a fire)

#10

Or eaten by vermin.

#11

Agreed!! lol

#12

I recall a question where it was ok to claim a CD from a bank had a guaranteed return if it was under the FDIC guaranteed amount. I got the question wrong because I said je was wrong for guaranteeing it. Just sayn.

#13

same here… recall a question where it was ok to guarantee a risk free return on treasury

#14

Yes maybe it was on 1 of the mocks too. I believe as long as it’s gov and AAA credit rated then you can guarantee a return

#15

I recall that question too, it think it was on level I…