Wednesday, October 21, 2015

Savings Bond News

This is just a reminder that the rates and terms may change on November 1st for EE Savings Bonds. (The rates and terms have the potential to change every six months for newly issued bonds.)

While others scramble to partake of the "massive" interest that short-term treasury bills may soon offer in a perfect world, I am preparing to make yet another purchase of EE Savings Bonds before the November 1st deadline.

On the one hand, the 0.3% rate currently offered is something that I do not really wish to lock in for the long-term.

On the other hand, a bond that is guaranteed to double in price in 20 years is equivalent to earning a 3.53% annual yield, which is a full percent higher than what the comparable 20-year treasury is currently yielding. Further, since EE Savings Bonds are tax deferred, buying them lowers my current income and therefore gives me a slightly larger subsidy on my government sponsored health care insurance.

This is not professional investment advice. We know this because in all the time I've owned Savings Bonds (since 2000), I can't ever recall hearing about them on CNBC. It's almost like Wall Street can't make any money off of me if I buy bonds directly from the government. Go figure.

So, here we go again. This is not my first EE Savings Bond rodeo. I've bought them in the past and held my nose when I did it. I'm holding my nose a lot less on those past purchases these days. Thanks ZIRP and tame inflation for not giving me any buyer's remorse so far!

In related news, I may buy I-Bonds as well. I'm going to wait until November 1st though, on the off chance the long-term fixed rate moves higher than the current 0.0%. I see little reason to lock in the absolute floor as long as there is a is a glimmer of hope. Realistically, the glimmer is extremely tiny though. I'd say there is a very high probability that the rate will stay 0.0% on November 1st. But we can all hope, right? That's especially true when holding out hope can't actually hurt me, as in this case.

EE Savings Bonds may or may not offer a good value right now, but I can say this with absolute conviction. They offer tremendous value relative to the 20-year treasury, and these days I'll take what I can get. Sigh.

Everything you need to know about Savings Bonds can be found at TreasuryDirect. It has been well worth my time to learn. Might be worth yours as well. No promises though. The future, as always, is hard to predict.


dearieme said...

0.0%? That's scandalous! By contrast the British equivalent yields a princely 0.05% real.

Stagflationary Mark said...


Hahaha! Behold the British miracle! ;)

A_Nonny_Mouse said...

I've got some I-bonds purchased several years ago. I've certainly been delighted each month, as I take note of a new round of bonds re-setting to zero percent.

But of course, that *IS* typical of my financial strategy: Try to protect against runaway inflation, and wind up living in the land of ZIRP.

(Because, heh, our "government-certified", heh-heh, statistics indicate that there IS NO INFLATION in this economy. Except in the items I actually buy. Just think, if I got a new computer every other month, I *too* would see no price inflation (on average). I might have to quit eating and using electricity, though, to ensure that the "volatility of food and energy prices" doesn't carry through to that "averaged" no-such-thing-as-inflation thingy...)

"Sigh ..." - to quote our genteel host.

Stagflationary Mark said...


The drop on gasoline prices would be helping me greatly... if I drove much.

That said, the rise in house prices is helping me quite a bit... if rising property taxes make me feel more prosperous, which they don't.

Sigh. <- Genteel catch phrase of the 0% interest rate "not a crisis any longer, and yet sort of still is" new world. Woohoo. Sigh.