In praise of Series EE Savings Bonds!
Thursday, August 18th, 2011
Categorized as: Savings Bonds and competitive investments • Series EE US Savings Bonds
Long-time readers know that I have long declared a preference for Series I bonds over series EE bonds. And that continues.
However, it’s remarkable that new investments in Series EE bonds, which have a fixed-rate of 1.10% and a guarantee that they will double in value in 20 years (an annual rate of 3.5%) are now a better investment than the equivalent Treasury securities that the big boys buy.
Market rates on the 20-year Treasury dipped below 3.5% as the current stock market crash began at the beginning of August. This means that if you intend to stay invested for 20 years, the Series EE Savings Bond is a better deal than the 20-year Treasury security.
And if you only intend to keep your money invested for 5 years, the EE bond’s 1.10% rate has also been above what you could get from the 5-year Treasury security for the last seven trading days. For shorter terms, such as a one-year investment (the minimum for EE bonds), the difference is even greater.
The interest rates the U.S. government has to pay to borrow – even for very long terms – have been dropping like a rock ever since the S&P downgrade, exactly the opposite of what everyone expected to happen.