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Author: math999man Big red star, 1000 posts Old School Fool Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35362  
Subject: The "new" EE better than "old&quo Date: 6/28/2008 8:04 PM
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I am considering cashing in some EE that where purchased before May 1, 2005 - so they are collecting a variable interest rate based on 5-year Treasurys. Returns are about 2.7%. I could get the needed cash from other sources, so I may not want to cash these in and loose these bonds when all I can purchase now are the "new" EE. Are is really any great advantage of the "older" EE vs the "new" fixed rate EE ?

For reference I have copied the US Gov description of the newer EE and older EE below -

Series EE Bonds purchased on or after May 1, 2005, earn a fixed rate of return, letting you know what the bonds are worth at all times. See our press release for more information. EE Bonds purchased between May 1997 and April 30, 2005, are based on 5-year Treasury security yields and earn a variable market-based rate of return.

math999man
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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 24137 of 35362
Subject: Re: The "new" EE better than "old Date: 6/29/2008 8:40 AM
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I am considering cashing in some EE that where purchased before May 1, 2005 - so they are collecting a variable interest rate based on 5-year Treasurys. Returns are about 2.7%. I could get the needed cash from other sources, so I may not want to cash these in and loose these bonds when all I can purchase now are the "new" EE. Are is really any great advantage of the "older" EE vs the "new" fixed rate EE ?

It is a virtual certainty that EE-bonds pegged to 90% 5-year Treasuries will beat new fixed-rate EE bonds over the long term. Also, remember you can only buy a pittance of new EE or I-bonds, so most of us have written them off for the future, even should yields look better.

If Treasuries return to somewhere near historical averages (let alone what you would expect an indebted government to have to pay its creditors), with tax advantage the 90% EE-bonds should provide an okay fixed-income return. The new ones are guaranteed to provide an awful return.

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