Q&A: Why would anyone buy US savings bonds at face value?
Anne edited the following
Question: Why would anyone buy US savings bonds at face value?
I just found out today that people can buy savings bonds from the US Treasury at face value. My question is: WHY would anyone want to do that when they can reap interest off from other types of treasury securities?
I have a BBA in finance. I literally had someone just tell me they were given a bond as a gift when they were younger that was bought at face value.
ANSWER:
Answer by jlf
I think you misunderstand. There are difference series of savings bonds.
Answer by muncie birder
Yes, you can buy them at face value. They still earn the pitiful interest rate same as if you had bought them at 1/2 face value. Unlike other treasury securities which are sold in 00 denominations, savings bonds are sold in denominations. That is one of the reasons people buy them. Another reason might be tradition. For a long time people bought savings bonds for themselves and for their children. And I suppose they passed the tradition on to their children.
Answer by romarti
Long term yield curve. I don’t know what the 10 year spot rate is for treasuries right now, but look at recent history. If you bought a t bond two years ago the annual rate for 2009 would have been about 3%. Earlier this year t bills were going for roughly 50 basis points. The yield curve compensates not just for a spot risk but for liquidity risk as well. Right now the market isn’t paying anything for liquidity risk so in some situations a tbond makes much more sense than a tbill.
Answer by v b
The classic EE savings bond is bought at 1/2 of face value. The face value was the representation of what the bond would do–though the interest rate is no longer tied to a specific maturity date.
The newer I-bonds (from 2000) are bought at face value.
Answer by Big Bully
Why? I started buying my bonds over 25 years ago when I was in the military, during that time and even today I feel its the patriotic thing to do. As for reaping interest? I have other investments, so I’m not to concern about the little interest I receive from these bonds
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