Bonds» Current Rates, News & Information

Choosing options for ones investment can be quite an endeavor because of the variety of financial properties out there. There are bonds, stocks, CDs, money market accounts, mutual funds, savings accounts, and many other options for consideration. However, since the beginning of both of their inception, people often wondered about the differences between Bonds vs. Stocks.

Bonds and Stocks are like comparing a cozy pair of slippers to a pair of high-heeled embellished stilettos. Bonds are often considered the investment options for little old ladies, as they are safe and secure as investors will not lose their principal and are guaranteed a rate of return. Stocks are like the rock-stars of the financial world. There are great highs and great lows, bigger risks with bigger pay offs. The reasons for these differences are as unique as the entities themselves.

Bonds are government issued investment properties that are non-marketable, meaning they cannot be traded.US citizens loan the government money by purchasing these bonds. In return, when these bonds mature (meaning the government is ready to pay back this loan) investors get back not only the face value of their original purchase but the compounded interest as well. Since these are federal properties, there are no state or city taxes due on the interest.

Stocks are marketable commodities, when purchased the investor is entitled to ownership in a corporation. The more stocks an investor holds, the bigger the share of the holdings. Public companies are organizations that are financially set up to sell shares and are beholden to their shareholders as far as decision-making is made. The profits made are taxable under capital gains and the feds, state, and city can all take their portion and the principal is not guaranteed or insured.

In the comparison of Bonds vs. Stocks the latter has a potential for a higher rate of return. Bonds are a fixed income security and Stocks has no schedule of repayment, thus the bigger the risk, the bigger the payoff. Experts advise a mix of these properties to diversify a portfolio.

On the surface United States (US) Treasury savings bonds may appear to be consistent as they are issued by the federal government. Question is, Why do bond rates differ so much ? There are several factors contributing to the rate fluctuations.

Bonds issued by the US Treasury started off being issued with regularity in the mid 1930s. In that time period bonds were issued in alphabetical order, starting with the A series and now running through the I series - which is available to investors for purchase now. Bond rates differ so much from one another due to the time they were issued and the type of interest they accrued.

For example, EE series bonds bought on or after May 1, 2005, generate a fixed rate of return. However, those EE Bonds bought between May 1997 and April 30, 2005, are valued on a 5-year Treasury security yields and generate variable market-based rate of return. Two times a year (May 1 and November 1) the government announces the earnings rates based on the variable Consumer Price Index. So even though the same series bonds are called by the same name the bond rates differ because of the date they were issued and purchased plus the contributing factors of a fluctuating market.

The I Bond Series is also a current investment option and their bond rates differs from the EE series because they were set up differently from the beginning. Their annual interest rates are derived from the combined effects of a fixed rate and a semiannual inflation rate plus they are an accrual-type security.

If investors were looking to diversify their portfolios, an assortment of bonds would be a decent strategy because bond rates differ. By buying an assortment of bonds one can take advantage of the interest rate of all the options available.

The first savings bond was issued in 1917, in the guise of a Liberty Bond. The US Government was looking for ways to enter WWI and the method of borrowing financial resources from another government werent viable at the time.

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