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- How Interest Rates Really Move the G and F Funds
How Interest Rates Really Move the G and F Funds
And Why “Safe” and “Bond” Aren’t the Same
Every TSP investor has heard the basics:
The G Fund is “safe.”
The F Fund is “bonds.”
But when interest rates change, these two funds can behave in completely opposite ways — and knowing why can mean the difference between steady gains and an unwelcome surprise.
The “Special Deal” That Makes the G Fund Different
The G Fund invests in special-issue Treasury securities—created just for the TSP.
Here’s what that means for you:
Your balance never loses value.
The interest rate is based on the average yield of medium- and long-term Treasuries (4+ years).
When rates rise, your credited rate drifts upward over time.
When rates fall, your credited rate slowly slides—but your principal stays intact.
Think of it like a cruise ship: it changes course slowly, but it won’t capsize in a storm.
The F Fund: Real Bonds, Real Price Swings
The F Fund tracks the Bloomberg U.S. Aggregate Bond Index — Treasuries, corporate bonds, mortgage-backed securities.
Unlike the G Fund, these bonds have market prices that go up and down daily.
When rates rise, existing bonds with lower coupons become less attractive → prices drop.
When rates fall, existing bonds look better → prices rise.
The speed and size of these moves depend on a measure called duration (the longer the duration, the more sensitive the price).
The F Fund is more like a speedboat—fast to respond, but quick turns can be jarring.
Why This Matters to Your TSP Strategy
Expecting rate hikes? The G Fund gives stability without a drop in value.
Expecting rate cuts? The F Fund can deliver quick gains—if you can handle short-term losses along the way.
Blending both: The G Fund is your principal protector. The F Fund is your interest rate opportunity.
💡 Action Tip: Before you move money based on headlines, check:
The G Fund’s current rate.
The F Fund’s 12-month return.
Remember—markets price in rate changes early. By the time you hear the news, the shift may already be in the numbers.
Your TSP is a toolkit—not a single tool.
And understanding how your “safe” fund and your “bond” fund actually work could be one of the simplest ways to make smarter, calmer moves with your retirement savings.
—FWR