Question:   How do you know when interest rates are low?

Answer:   When the current 12-month CD at your credit union is paying out a whopping 2.2% yield.

And that's where my local credit union stands right now. I can tie up my money for a year, and in return, I get to revel in a 2.2% profit.   Unfortunately, I do have money tied up at this rate.   I say "unfortunately" because, for the sake of comparison, the straight old savings account at my primary credit union (the one through which my checking and savings accounts reside; it's in my hometown, about 100 miles away) is paying 2.5%. My money would earn more there − though not a lot more. But it would be much more liquid. I could get at it anytime if I so desired. (There was a time when that wouldn't have been a good thing, but I've matured a bit since then.)

Anyway, I've spent a good deal of time on the 'net, surfing around for better yields. I've put a small amount of money in a few R.E.I.T.s, but those aren't for everyone. The yields tend to be quite nice, but like all stocks, they trade on supply and demand. Their per-share prices fluctuate by the moment. So if you're entirely risk-averse, you won't much like REITs. You could easily collect an 8% annual yield on your chosen REIT while holding it for a couple of years, but still end up losing money when you sell the thing because the share price has dropped from, say, $25 down to $19. This could happen for any number of reasons:   The company's real estate market dried up; it had a cash crunch and was forced to cut its dividend; it underwent a management change. Plus a million more reasons that that Amazing 8-Ball resting on your desk won't tell you about ahead of time.

Which brings us to bonds. There are three major types of bonds readily available:   corporate, municipal, and U.S. treasury. If it's absolute safety you're looking for − and after the last three years of abyssmal stock-market returns, hordes of people are − then treasury bonds might be the place to look. These are considered to be just about the safest interest-bearing investments out there, since they're backed by the "full faith and credit" of the U.S. government.

(Face it:   If the U.S. government goes into default, then the inheritance money you just invested in treasury securities is probably the last thing you need to worry about.)

So how do I start investing in bonds?

Listed below are the sites I've come across that relate to U.S. government bonds and rates. I'm brand new to the world of federal treasuries and such, so everything you see below is fresh to me, too. But the idea of purchasing bonds online, direct from the federal government and commission-free, is quite appealing. So set aside some time and check out the possibilities.

(Additionally, here's a small article from Bankrate.com on "How Treasury Bills, Notes, and Bonds Work."   And here's another article, entitled "Buying Bills, Notes, Bonds, and Savings Bonds," that gives a nice overview on Treasury securities of all types.)


  U.S. Treasury / Bureau of the Public Debt Online If you're looking for information about U.S. government bonds and investing in them, then this is the place to begin. The Department of the Treasury maintains the site, and they do a fantastic job. You can find out where current interest rates stand, as well as determine all minimum purchase amounts and holding periods for all varieties of treasury securities − and there are lots of them. If you have questions, chances are the answers can be found here.


  TreasuryDirect If you're interested in opening a direct account with the Treasury that'll allow you to purchase savings bonds, notes, t-bills, and other U.S. government securities, then this is your spot. Setting up the account is a breeze. You'll be ready to transfer money electronically and buy I-bonds, or 90-day T-bills, or whatever, in no time!

Michael | February 26, 2003

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