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Beating the Buying Limit on Savings Bonds

Investment-Advisor-Trader-Finance

 (Reuters)

Dear Dr. Don,
Have the savings bond purchase limits changed for 2011? My bank has refused my request to purchase a $5,000 I bond because they say I already have purchased the maximum in electronic I bonds via TreasuryDirect.

-- Kenneth Constrained

Dear Kenneth,

The savings bond purchase limit changed as of Jan. 1, 2008. The Treasury press release on the annual purchase limit for savings bonds being set at $5,000, explains it in greater detail, and it explains how you can finesse the issue to buy more Series I bonds as excerpted below.

The limit applies separately to Series EE and Series I savings bonds, and separately to bonds issued in paper or electronic form. Under the new rules, an individual can buy a maximum of $5,000 worth of electronic and paper bonds of each series in a single calendar year, or a total of $20,000, in single ownership form. If paper bonds are issued in co-ownership form, the limit applies to the first-named co-owner. All limits are based on the issue price of the securities.

Also, check out an earlier column on getting around the Series I-bond limit. It points out that you can convert the paper bonds you purchase to electronic form without violating the annual purchase limits and how Treasury inflation-protected securities, or TIPS, are a way to gain inflation-protected yields without the purchase limitations placed on savings bonds.

The Treasury just announced the yields currently available on Series I and Series EE savings bonds. Series I savings bonds purchased over the next six months will earn a fixed rate of zero percent over the bond's 30-year life and an inflation component of 4.6% over the first six months. The inflation component yield changes every six months based on changes in the Consumer Price Index.

Bank Rates

Loan Type Graph Rate +/- Last Week
30 Y Fixed Graph 3.85% dw 4.04%  
15 Y Fixed Graph 3.02% dw 3.15%  
30 Y Fixed Jumbo Graph 4.28% dw 4.31%  
5/1 ARM Graph 3.05% dw 3.13%  
5/1 Jumbo ARM Graph 3.73% dw 3.85%  
Loan Type Graph Rate +/- Last Week
$30K HELOC Graph 4.37% dw 4.38%  
$50K HELOC Graph 4.07% -- 4.07%  
$30K Loan Graph 4.60% dw 4.63%  
$50K Loan Graph 4.20% dw 4.25%  
$75K Loan Graph 4.20% dw 4.25%  
Loan Type Graph Rate +/- Last Week
36 M New Graph 3.07% up 3.06%  
36 M Used Graph 3.30% up 3.28%  
48 M New Graph 3.06% up 3.05%  
48 M Used Graph 2.96% -- 2.96%  
60 M New Graph 3.14% up 3.12%  
Loan Type Graph Yield +/- Last Week
6 month Graph 0.39% -- 0.39%  
1 yr Graph 0.63% up 0.62%  
5 yr Graph 1.48% dw 1.51%