Safety for less

A lower price makes treasury bonds more affordable for all

There’s good news and bad news for bond investors. First, if the tremors, shakes and shocks of stock markets at home and abroad have driven you to consider rock-solid Treasury bonds, you’ll be glad to know that the minimum required to buy a short-term note is down to $1,000 from $5,000 or $10,000.

The downside is that the good tidings come at a time when the yield on U.S. Treasury bills has dropped below the rates doled out for certificates of deposit at your local bank. You needn’t look any further than the Federal Reserve for a reason. The Fed, as financial pros call it, moved to lower interest rates not once but twice in the fall. That left the two-year Treasury note paying 4.5% interest annually vs. 4.54% for a one-year CD-a virtual dead heat and little incentive to keep your funds tied up an extra year.

Puzzled about what to do? First look at when you’ll need the money you’re investing. The current outlook is for interest rates to remain low and perhaps even fall a bit. Experts say if you’re looking for a steady stream of income over the long term-say 10 or more years-turn to Treasuries under the scenario we’ve described above. If you’ll be tapping the funds in under 10 years, it’s probably a good idea to look to CDs.

Still ready to make the leap into government securities? Remember, you can buy your T-bonds, notes, and bills directly from the Treasury by calling 800-943-6864 or visiting the Treasury Direct Web site at www.public debt.treas.gov. But be absolutely sure that they’re the right vehicles for you. Cashing in a bill before maturity carries a $34 fine, and you have to complete reams of Treasury Department documents. Fortunately, brokers like Charles Schwab (www.schwab.com) charge $49 to do the dirty work, which includes filling out early-withdrawal forms.

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