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  • 5 years ago

I have this fundamental doubt, Why would anyone deposits their funds in BANK fixed Deposit If they are getting Higher return on ten year treasury bond. and its also risk free (or far less risky) than the banks

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  1. anonymous
    • 5 years ago
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    I think, because 10 years is a really big period of time, as for me I'm not ready to invest for such a long period. At the same time if you buy 10y treasury bond and you are not going to wait the whole period it is not a risk-free investment.

  2. mayank
    • 5 years ago
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    The bank fixed deposit and the 10 year treasury bonds are two different options. The fnudamental difference is that a fixed deposit isa very highly flexible option. It allows you to withdraw your seed money at any point in time and offer yearly interest payments along with the principal. There are only a few fixed deposit options which need a lockin for a higher period fo time. The treasury notes are bullet payment bonds and only commit a gain fi the investor is willing to invest and forget about it for th next one year. A common man is usually in need of cash in the short term and hence may not wish to invest in such options. Banks and other financial institutions need to have a strong portfolio and hence they continue to build assets in multiple categories including long term treasury bonds. I hope this provides a perspective on the investment strategy followed by the common banks and requirement for financial products like Fixed deposits in retail banking.

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