Chat GPT came up with basically the same answer I was thinking for this question, but I was still amazed at how quickly it produced the answer. FA's everywhere crossing their fingers and hoping people don't get too familiar and comfortable asking LLM's questions! The only flaw I could spot in Chat GPT's logic is that it didn't put together that the loss was unrealized. If it was realized, then the question to roll or not to roll would be a moot point. Still impressive.

Question: I have a 2 year treasury note with a 4.375% yield payable semi annually. The current yield on the same duration note is 5%. I have a .9% loss on my current note. Should I roll to a new 2 year note at the higher yield or hold on to current one until maturity? 

Answer: To determine whether you should roll your current 2-year Treasury note into a new 2-year note with a higher yield or hold onto your current one until maturity, you should consider a few factors:

1. Current Yield vs. Yield at Purchase:

   • Your current note has a yield of 4.375%, while the new 2-year note offers a yield of 5%. This suggests that the new note would provide a higher return if held to maturity.

2. The .9% Loss:

   • You mentioned that you have a 0.9% loss on your current note. It's important to clarify whether this loss is realized or unrealized. If it's an unrealized loss (meaning you haven't sold the note yet), you might want to consider if you are comfortable holding the note until maturity or if you expect the loss to widen further.

3. Time to Maturity:

   • Consider how much time is left until your current note matures. If it's close to maturity, you might decide to hold onto it, especially if the loss isn't significant and you believe that interest rates won't rise dramatically in the short term.

4. Future Interest Rate Expectations:

   • Evaluate your expectations for future interest rates. If you believe that interest rates will continue to rise, locking in a higher yield with the new note may be more attractive. However, if you expect interest rates to stabilize or even decrease, holding onto your current note may make more sense.

5. Liquidity Needs:

   • Consider whether you have any immediate liquidity needs. If you need access to the invested funds in the near future, you might prioritize that over maximizing yield.

Ultimately, the decision to roll over your current note or hold it until maturity depends on your individual financial goals, risk tolerance, and market expectations. You may want to consult with a financial advisor who can provide personalized advice based on your specific situation and objectives.