In this historically low interest rate environment, many Municipalities, Corporations and Non-Profits are facing the challenge of how and where to find yield. Understandably, your business may be looking for alternative strategies to capture returns. Our investment team at Camden National Wealth Management outlines five ideas for vehicles you may want to consider including in your Fixed Income portfolio.
When considering safety and liquidity:
- U.S. Treasury Bills, Notes & Bonds
- Treasury Bills: A short-term U.S. government debt obligation backed by the Treasury Department with a maturity of one year or less.
- Treasury Notes: A U.S. government debt obligation with a fixed rate of interest and maturity between one and 10 years; interest is paid every six months.
- Treasury Bonds: A long-term U.S. government debt obligation; issued in 20- or 30-year terms; pays a fixed rate of interest every six months.
- Tax Considerations: Interest income is exempt from state and local taxes, but subject to federal income tax.
- U.S. Government Agency Bonds
- Issued by either agencies of the U.S. Government or government-sponsored enterprises (GSE’s)
- Backed by the full faith and credit of the United States government while GSE’s have an implicit guarantee making these investments of high credit quality, while typically providing a pick-up in yield over treasuries.
- Certificates of Deposit (CD’s)
- Brokered CD’s allow you to access CD’s of banks across the country, often enabling a pick-up in yield due to the large varied inventory.
When moving up the risk curve:
- Investment Grade Corporate Bonds
- Issued by a corporation in $1,000 face increments
- Flexibility to control quality and duration
- Investment Grade scale from AAA to BBB-
- Fixed Income investment vehicles through Exchange Traded Funds (ETF’s) and Mutual Funds
- ETF’s are a basket of securities, in this case, Fixed Income instruments. They can provide exposure to corporate, municipal, government, international debt, or some combination thereof. They provide liquidity throughout the trading day by trading like a stock on an exchange.
- Mutual Funds are another vehicle offering exposure to a basket of securities, similar to ETF’s, and broadening the available scope of actively and passively managed investment options.
- With both mutual funds and ETF’s, there are many styles and strategies available in structuring income streams when necessary.
If your business is interested in learning more about fixed income instruments and strategies, our team of experts is here to customize and support your goals during this challenging time. Give us a call at 207-774-3333.
Camden National Wealth Management’s products and services are not deposits or other obligations of the institution and are not guaranteed by the Institution nor are they insured by the FDIC. The products are subject to investment risks, including possible loss of the principal invested. Nothing in this document is intended to convey legal or tax advice. Please address any tax and legal questions with your professionals. Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this information (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.