BONDS » Current Rates, News & Information

Whether you think about it or not, when interest rates rise it affects your life in good ways, and unfortunately, in bad ways as well – want to learn why?

First, let’s start with why interest rates are rising. Interest rates on U.S. Treasury securities are starting to move higher. As the US Government prints more and more money to fuel the bailout, aka the recovery efforts, the dollar can weaken and so can the world’s perception of the United States credit-worthiness. The US Government issues billions and billions of dollars of Treasury bonds each month, and if they are traded at discounted rates, that in turn increases the effective interest rate on those bonds. That is a major driver of interest rates in the US, including mortgage rates, auto loan rates, credit card rates, CD rates, savings rates, etc.

Everyone is looking for a safe way to invest their money. People want to ensure not only that their principal remains intact, but that their money earns a high yield and lives up to its fullest potential. One way to diversify your portfolio is to invest in treasury direct bonds and a precautionary measure for bad economic times. Treasury direct bonds have been a way for investors not only to protect their financial interests but to earn a consistent and guaranteed rate of return

By using treasury direct bonds, your money will have the muscle and promise  of the U.S. government behind it. You can rest easily knowing that you will not only get back your initial investment, but the Federal government will also pay you a yield that will be free of state and local taxation, thus enabling you to keep more money in your pocket.

No matter what your age, making contributions into a 401(k) plan is a good idea that will pay dividends when you reach retirement age. The recent recession has had a huge impact on the 401(k) balances of people in all age groups, but those who are closer to traditional retirement age may feel those losses more acutely as they struggle to reclaim the fat balances they saw in the 2003-07 bull market. No matter what your age, there are strategies that can help you even the odds and regrow your savings in time for retirement.

401(k) for Your 20′s

If you are wondering whether Savings bonds are taxed or not, there are general rules that owners of Savings bonds must adhere to. According to the US Treasury website:

• Interest earnings are exempt from State and Local tax
  
• Interest earnings are subject to Federal income tax but can be deferred until the cash in date
  

If bonds are cashed out and the money is used specifically to finance the cost of higher education for an individual, spouse or child, taxes on Savings bonds may be waived. However, it is important for an individual to verify the terms of their savings bonds with their tax preparers to ensure that they are completing their tax information accurately.


The reason that taxes on Savings bonds do not have to be paid at the State and local level is because the U.S. Treasury issues savings bonds. Investors redeeming savings bonds will receive a 1099-INT  form in the tax year of that transaction.

Prior to World War I, the government financed their bankroll for participating in wars by borrowing money from other countries. However, in 1917, the international banks were closed and the basis for our savings bond system was launched.

Like other predecessor bonds, Patriot bonds are marketed as another tool allowing Americans to support our wars. The proceeds of this particular bond are applied towards funding anti-terrorism efforts. The profits are deposited into a general fund. Ultimately the money funds anti-terrorist causes and must follow legal guidelines before being spent.

The US Treasury offers two categories of government securities available for investment options for US citizens. The government offers marketable treasury securities that are available to be traded on the secondary market. Additionally there are non-marketable Treasury products, such as I Savings bonds, that are issued to individuals and are not a traded.

The history of all bonds, including the I Savings bonds can be trace back to the first bond called Liberty bonds. Liberty bonds were developed as a way for our government to fund the expenses of fighting World War I. Previously the government was able to finance wars by borrowing from other countries, but at that time there was no one to borrow from. The solution was borrowing directly from the country’s citizens and offering them a financial incentive to provide the loan. The initial bonds caused some more crises for the government when they all matured.


Over time, bonds were redesigned to avoid any additional financial crunch on the US Treasury system. Since the mid 1930′s, the government has sold savings bonds to generate low cost loans to help build their reserves. For the privilege of borrowing taxpayer’s money, the government will pay interest and even offer tax incentives for those who are cashing in their matured bonds. At that time bonds were issued in an alphabetical order and today individuals can purchase I Savings bonds.

To understand what a HH Savings bond is, you must understand the whole network of government securities issued as a whole. Like all US savings bonds, HH Savings bonds are considered a non-marketable Treasury security. In general, they are government bonds issued by the US Department of the Treasury through the Bureau of Public Debt and they help finance the US debt – while providing investors a rate of return.


There are two categories of government securities:

1. Marketable treasury securities which are very liquid and heavily traded on the secondary market – including:

For decades US Savings bonds have been a safe and effective way for consumers to invest their money while providing loans to government agencies that were strapped for cash. Aside from ensuring that your principal will not be depleted and offering a relatively decent rate of return, US Savings bonds, especially Education bonds, also have tax incentives for consumers.

An Education bond is a standard US Savings bond that has been cashed out specifically for the use of paying the cost of higher education for oneself, spouse or dependent to claim an exemption on their return. To further qualify for the tax benefit in the case of a spousal education payment, the married couple must file a joint return; and for all types of claims the modified adjusted gross income (MAGI) must be less than $80,600 ($128,400 if married filing jointly or qualifying widow(er).

With changing market conditions, it is extremely challenging to figure out the best place to invest your money.

An EE Bond is a low-risk investment options backed by the US government that generate a fixed rate on return. They have the funds of the US reserves behind them and can be used as gifts, or towards financing education, or as supplemental retirement income.


Knowing that the risk is low and the return is solid, it’s a safe investment for anyone who has been iffy about the current economic state. EE Savings Bonds can be purchased both in an electronic or paper form, however there are some key differences to those bonds.

If you buy EE savings bonds in electronic form, they are sold at face value, so a $75 investment buys a $75 bond and it is worth the total value when ready to be redeemed. The maximum purchase an individual can make annually is $5000 and they are sold in $25 increments. Once purchased the bonds are issued electronically to your banking account.

When you think of making investments, it’s hard not to think of the word bond as well. Along with stocks, bonds are probably one of the most well-known ways to invest money.

But what are they exactly? And how are they utilized to make investors money? We will explore the basics of the investment tool to help you in the event that you want to make this your next investing move.


The Definition of a Bond

A bond is a debt instrument issued by large companies and organizations in order to raise capital that can’t otherwise be borrowed from banking institutions. Because businesses need large amounts of money to operate, they borrow money from investors by issuing bonds. As a sort of “thank you” for the loan the investor provides, the business agrees to pay back the money with interest on a predetermined date.