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Subject:  Re: Treasury Zero-Percent Cert of Indebtedness ? Date:  2/27/2005  2:15 PM
Author:  Mark0Young Number:  11940 of 36218

I think Paul misunderstood what C of I's are.

C of I's serve as a way to hold cash at TreasuryDirect without locking up that cash in a Savings Bond.

I can think of a couple places where a C of I may be useful:

1. The employer uses payroll withholding to fund your TreasuryDirect account. However, your employer doesn't know the details of how you want your Savings Bonds registered. So, instead of buying Savings Bonds, the money goes into C of I. Once you have at least $25 in C of I (the minimum purchase price of either an I-Bond or an EE-Bond at TreasuryDirect is $25), you can then use that to purchase your Savings Bond using whatever registration available to you (e.g., you might want to rotate beneficiaries between your children) and decide whether you want to purchase an I-Bond or an EE-Bond.

2. You want to schedule regular direct debits of your checking account, but you cannot afford to do $25 each time. You can schedule smaller purchases of C of I and then when the C of I balance is at least $25 you can then purchase a Savings Bond.

Since C of I doesn't pay any interest, it would not be a place where one would want to hold cash for a long time, but some people may find it convenient as a temporary holding place for money about to go into or just came out of a Savings Bond.

Also, when TreasuryDirect starts issuing marketable securities (Treasury Bills, Notes, Bonds), it may be handy to have the interest go directly into a C of I, which could then be used for purchasing more marketable securities if the C of I balance had grown large enough.
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