Markets are closing the year on an odd note. The Federal Reserve has lowered interest rates by a full point. But bond investors are pushing yields higher, particularly on longer-dated bonds. The 10-year Treasury yield is now at 4.6%, its highest for 2024, up over a full point since September.
It’s possible that investors are simply repricing the bond market for increased uncertainty from the Fed. And from the potential impact of Donald Trump’s plans for tariffs and taxes in 2025.
Whatever is happening, bond buyers can lock in some of the highest yields in 15 years right now. That’s a strong trend. Or, investors could invest in a company that has a large balance of Treasury holdings, like Berkshire Hathaway (BRK-B).
The conglomerate now holds over $234.6 billion in Treasuries, just over a quarter of the company’s market cap. And as long as rates stay higher, that means more income for Berkshire.
Action to take: Berkshire’s positioning allows them to benefit from today’s high rates, but scale out of Treasuries to buy great companies in a market selloff.
Investors who don’t already have a position may want to start building one, although Berkshire famously doesn’t pay a dividend.
For traders, Berkshire can likely hold off in a market selloff. Traders should look at the March 2025 $475 calls, and look to buy on a down day for shares. The options last traded for about $9.15.
Disclosure: The author of this article has a position in the company mentioned here, but does not intend to trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.