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DEEP RESEARCH · U.S. TREASURIES

[Personal Pension Investing] Time for U.S. Treasuries

An investment memo on potential government spending cuts, Treasury supply, and a 100% U.S. Treasury allocation in a personal pension

Date: 2024-11-13 · Personal pension investment record · Naver Blog

Investment decisions are your own responsibility. This material is research and is not a buy or sell recommendation.

0. Bottom line first

In my personal view, the time for U.S. Treasuries may be coming. So in my personal pension, I am considering putting 100% into U.S. Treasuries.

People say Musk's plan is absurd, but if it is actually implemented, I need to watch how it affects U.S. Treasury issuance and the rate environment. Where the saved money is used is also an important question.

Investment thesisPotential government spending cuts
Policy variableReported $2 trillion cut plan
Bond supplyPossible reduction in Treasury issuance
Pension account100% U.S. Treasury allocation
Next actionWait for an equity drawdown
A defensive Treasury position while waiting for a future switch into equities

1. Core questions

  • Can Musk's government-efficiency plan actually be implemented?
  • If implemented, what effect would it have on U.S. Treasury issuance?
  • If Treasury issuance falls, what changes could occur in long-term rates and bond prices?
  • Where would the reduced spending be redirected?

Official fact: The Seoul Economic Daily/Daum article linked in the original post is titled “Musk Likely to Head Government Efficiency Committee... $2 Trillion Cut Plan Sparks Debate [Trump 2.0 Era],” and its preview mentions a plan to cut at least $2 trillion, about KRW 2,800 trillion, in federal spending.

Interpretation: The core of this note is not the political news itself, but the possible change in Treasury supply-demand and long-term rates if spending cuts become real.

Preview image for article about Musk and a government efficiency committee

2. Personal pension execution plan

I applied on the 14th, but because it is a fund, I was told it would enter on the 18th. In the personal pension account, the decision is to hold U.S. Treasuries at a large, effectively 100%, weight.

Personal pension screen related to adding U.S. Treasuries
Weight

100% U.S. Treasuries

The personal pension account is positioned defensively around U.S. Treasuries.

Yield

4.5% rate

From a long-term view before retirement, I do not think a 4.5% U.S. Treasury yield necessarily fails to cover inflation.

Switch

Wait for equity decline

If U.S. equities fall significantly later, I plan to switch into stocks then.

3. Long-term holding view

Considering the long term before my retirement, I do not think a 4.5% U.S. Treasury yield is inadequate against inflation, so I am taking a large allocation.

I view the probability of not losing money over a 10-year investment as 99%. In addition, I see a 90% chance of getting an opportunity to buy U.S. equities after a decline of more than 15% within a 3-year investment period, and I plan to switch into stocks then.

Interpretation: This Treasury position has two purposes: securing the 4.5% yield itself and serving as a cash-like waiting position that can be shifted into equities during a future drawdown.

4. Similar cases and reference links

As similar cases, I thought of recent Argentina and Korea during the IMF period. The original post also left a reference link about Argentine investors and Milei's popularity.

Sources

Naver original