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Pauleckler asks,

intercst, please tell us how you get your bonds

I use either Treasury Direct to buy 2 or 5 year notes or I look for a 5 year CD from the Bank Rate Monitor site, see link:

http://www.bankrate.com/brm/rate/high_home.asp

For the last year or so the rate on the highest yielding 5 yr CDs have been about 75-100 basis points higher than a 5 yr Treasury note. (Today, the 5 yr note is yielding 6.03%, the best rate on the www.bankrate.com site is 6.83% for a 5 yr CD.)

Note: I live in a state that doesn't have a state income tax, so there is no advantage to holding US Treasuries vs. CDs. In states where there is an income tax, interest on US Treasury securities is usually exempt from the state income tax. You need to factor that into your calculation.

I don't hold corporate or municipal bonds because of the default risk, however small. Since I view my bond portfolio as a haven if we have a repeat of "the Crash of 1929", the small additional yield isn't that attractive to me. My preference for US Treasuries and FDIC insured CDs is meant to protect the absolute downside.

intercst
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