You've seen your last one-year Treasury bill. The government isn't selling them anymore. One-year bills won't come back as long as the national debt keeps going down.
The change was announced on Jan. 31, although you might not have heard about it. The last auction of one-year bills was held on Feb. 27.
The Treasury will still be publishing a one-year rate, called a "constant maturity rate," but instead of being a real rate, it will be inferred from other rates. Investors can use it to measure the risk-free rate in the marketplace. You'd expect a one-year investment to pay more than the Treasury rate.
The government will also use the constant maturity rate as a benchmark for its variable-rate loans. For example, it will establish what students pay for subsidized student loans. So you'll see references to the one-year rate, even though that bill doesn't exist anymore.
Any one-year T-bills you currently own are good until they mature. But after that, you'll have to choose another maturity or another investment instead.
Short-term investors can still get three- and six-month Treasury bills. That's the most likely place for today's one-year investors to move. You get the government guarantee plus frequent access to your money. Right now, three-month bills yield 4.76 percent.
Those who won't need their money for a while might consider two-year Treasury notes. They're yielding 4.47 percent just a hair less than you'd get from short-term bills.
Usually, the longer-term notes yield more. But if short-term interest rates continue to fall, you might do better with two-year notes over the entire term.
Treasuries offer a tax advantage, especially to investors in highly taxed states. You pay only federal tax on the interest, not state and local tax.
You can buy Treasuries directly from the government. Either open an account by Web at treasurydirect.gov or call Treasury Direct for the paper forms. There's no fee unless your account is larger than $100,000. Then you pay $25 a year.
Treasuries are also available through banks and stockbrokers, but there's no point paying a commission when you can buy them free.
Still, many investors today are choosing to keep their savings somewhere else. "The return on short-term bills has just not been high enough over the last year," said Steve Ames of Ames Fee-Only Financial Planning in Annapolis, Md.
"There are so many alternatives, that ending the one-year Treasury bill is a non-event," said Kenneth Hoffman, a financial consultant with Merrill Lynch in New York. Options include bank certificates of deposit, money market funds and other government securities.
Ready cash earns the most today in money market mutual funds, available at mutual-fund groups and brokerage firms. Taxable funds currently yield an average of 5.16 percent, compared with just 1 percent to 2 percent in bank savings accounts. Taxable funds that invest in insured government securities yield 5.08 percent.
Money funds are as liquid as checking accounts. You can take out cash whenever you want, without penalty, and even write checks against the account. Unlike banks, however, funds generally require that the check be for $250 or more. (A few process checks for smaller amounts.)
Top-bracket investors should look at tax-exempt money funds, currently yielding around 3 percent. They net even more than you'd get from three-month Treasuries, after tax.
For longer-term savings, Ames has been using various types of bond mutual funds. "The past year has been the best year we've had in the bond market for quite a while," he said. Medium-term bond funds currently yield around 5.54 percent in dividends, according to Lipper, a firm that tracks fund returns.
But bond-fund returns aren't guaranteed the way Treasury securities are. Their value changes, depending on what happens to interest rates.
When rates fall, bond funds earn capital gains. In the past 12 months, their total return has risen an average of 11.6 percent, Lipper reported. When interest rates rise, however, you'll take a capital loss.
Syndicated columnist Jane Bryant Quinn can be reached in care of the Washington Post Writers Group, 1150 15th St., Washington, D.C. 20071-9200.
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