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July 13, 2011
Treasury to End Over-the-Counter Sales of Paper U.S. Savings Bonds; Action will save $70 million over first five years
WASHINGTON – The Bureau of the Public Debt announced today that as of January 1, 2012, paper savings bonds will no longer be sold at financial institutions.
In 2011, we could buy $5,000 in electronic I bonds and $5,000 in paper I bonds. Fortunately, they have increased the amount of electronic bonds we can buy. The $10,000 limit therefore still applies. We're not being shafted! Hurray!
FAQs Concerning the Change in the Annual Purchase Limit for Savings Bonds
What is the annual purchase limit for U.S. Savings Bonds?
Effective January 4, 2012, the annual (calendar year) purchase limit applying to electronic Series EE and Series I savings bonds is $10,000 for each series.
I was just about to make a small purchase in the 10-year TIPS auction that was announced last Thursday. I shall instead buy more I bonds and EE bonds with that money.
I'm generally not a fan of the EE bonds (due to the added risk of fixed interest rates in an inflationary world) but the government is currently running a special. That should partially compensate me for some of that added risk.
EE bonds held 20 years should offer an average rate of 3.53% (since the bonds are currently guaranteed to double if held 20 years). Meanwhile, the 20-year nominal treasury yields just 2.59%. I can't say that EE bonds are an absolute bargain (inflation could get out of control), but they are a relative bargain. In other words, long-term savers could certainly do worse.
Special thanks to fried (in the comments of the last post) for drawing my attention to the update on the new savings bond purchase limits. This is yet another reason why I like to blog!
Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to
4.15 million SAAR in November
-
At the Calculated Risk Real Estate Newsletter this week:
[image: Existing Home Sales]*Click on graph for larger image.*
• NAR: Existing-Home Sales Increase...
16 hours ago
14 comments:
Bonus thought.
The 10-year TIPS auction was looking to have a negative interest rate. I'm glad I no longer feel the need to participate.
The lowest rate an I-Bond can have is 0.0% and it is tax deferred for up to 30 years.
By comparison, win win.
Pleased to have made a contribution to your great blog. You answered my question, I think. I was looking to build a TIPS ladder when I saw the ibond and ee bond updates. I am planning to do the limit on both and skip the TIPS auction this time, as negative rates scare me. I'm wondering if Euro money looking for safe harbor is driving those rates down.
This is great news.
Now, if only I could buy i-bonds from inside an IRA, I would be set.
fried,
My TIPS ladder has gaping holes in it (based on opportunities as they appear, like the one back in February). Based on this new savings bond news, it doesn't seem likely that I will be participating in another TIPS auction until 2016. That's when a rather large 2% 10-year TIPS bond (bought at a discount) in 2006 will mature.
They can pry the I bond ladder from my cold dead fingers though. I buy as much as I can every year (mostly due to the piece of mind of the tax deferral if inflation picks up).
Mr Slippery,
Now, if only I could buy i-bonds from inside an IRA, I would be set.
It is a sad state of affairs when buying tax deferred I bonds within a tax deferred retirement account makes sense. Seeing as how the I bonds currently have a much better interest rate (a whopping 0.0%) than the 5-year TIPS it does make some sense though. Go figure. Sigh.
Mark,
no relation to bond rates, but rumors on the web say Obama is considering
Larry Summers to head the World Bank.
I am now officially considering digging a bunker. Robert Rubin, Summer's mentor, might consider the old Oppenheimer quote for his tombstone..."I am become the destroyer of worlds".
I am Anon...
SNOW!
Something big and nasty is on the way.
Where will it go? It's already miserable in SoCal with the high in the low 60s today. Ick.
fried and Mr Slippery,
The "destroyer of worlds" (the snow) hit us fairly hard. Just now have Internet back up.
So... it sounds like you're not going to purchase an additional 5K in paper bonds via your tax refund (http://thefinancebuff.com/backdoor-to-paper-savings-bonds.html)? I would have thought of all people Mark would be on board that train with The Finance Buff, some Bogleheads, and me of course ;-).
(long time lurker, first (and only?) time poster)
David C,
First off, welcome! Thanks for posting. It would seem that I have turned into a long time lurker of my own blog. Well, at least for the last few weeks anyway. ;)
I always tries to owe money to the IRS each year. It has been a while since I actually got a tax refund.
Think of the interest I earned on the government's money! For example, my checking account currently pays 0.04% interest. That means that for each $1000 I owe the government I am currently earning nearly a penny per week! Sigh.
Bonus thought.
Thanks for sharing that link.
As a side note, I don't have the cash flow to participate even if I wanted to do so now. The next few years are going to run a bit lean due to the big purchase of the long-term TIPS I made back in early 2011. In theory, I'll still be able to buy $10k I bonds each year. Don't know if I'll have the funds available to buy the EE bonds next year though (or perhaps even the desire if they change the time it takes for them to double in price).
Mark,
Glad to see your comment. Hope all is well with your dentistry and your family. Gold up, treasury yields down and QE3 apparently on the way. And big Ben has set an inflation goal of 2%...but not apparently for wages.
Oh well.
fried,
I'm actually going to do a post today. Go figure! ;)
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