G Fund share


Q: I understand that by law the TSP G Fund must be “made whole” such that the funds cashed out to fund current operations instead of being reinvested must be put back into the fund with interest as if they had been reinvested as scheduled. However, I disagree with previous posts that say there will be no impact from default.
If the government defaults on repaying debt (principal and  interest on treasuries) due to not increasing the debt ceiling, then the market reprices treasuries to account for risk (higher yield, lower price). Does this price decrease in current treasuries, then lower the share price of the G Fund since the treasuries it holds are now worth less? Or are treasury notes always held to maturity so there is not a loss on selling them, just that market yield and inflation percentage will be significantly higher than the G Fund return until the notes held cycle? If it is this second idea, then G Fund is still a great short-term way to shelter from a large drop in equities if the scenario comes to fruition. Do you know how the G Fund share price is determined and thus which way it may play out?

A: The G Fund does not hold treasuries and there is no market risk to the share price.


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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