Magazine article Medical Economics

It's Time to Buy Treasuries

Magazine article Medical Economics

It's Time to Buy Treasuries

Article excerpt

Interest rates are headed higher--finally. But if you park your cash in a money-market fund or a bank, the increase will be slow. That's the price you pay for having your funds available instantly.

To get a higher yield now, invest some of your money where banks and money funds put some of theirs: with the U.S. Treasury. Uncle Sam was recently paying yields that ranged from about 4.5 percent for three-month investments to about 7.5 percent for 30-year commitments. A bonus: The interest on Treasury securities is exempt from state and local income taxes.

Buying Treasuries directly from the manufacturer is fairly simple. Just follow the instructions that accompany the forms you get from the government.

Bills, the shortest-term Treasury securities, mature in three, six, or 12 months. The minimum investment is $10,000, and the interest is paid in advance. Notes and bonds mature in two to 30 years and pay interest every six months. Two- and three-year notes are available for $5,000, longer-term securities for $1,000.

Choosing a maturity involves guesswork about where interest rates are heading. To keep the guesswork to a minimum, consider buying various maturities, timing the purchases so that you'll have money coming back every few months. As you reinvest that money, it will earn a mix of shifting short-and longer-term interest rates.

The accompanying table gives you a general idea of when the available maturities are scheduled for sale. For exact dates and the necessary forms, call the nearest Federal Reserve bank or branch. …

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