For those who can stand a tiny bit of risk, there are some great deals now on municipal bonds. A couple of weeks ago I got 5.36% tax free yield-to-maturity (5.25 coupon rate) on AAA municipal bonds that mature in 2014 – this deal is gone now as the bond value is up – I am even thinking just selling it, although I’ll probably keep it as long as yield-to-maturity (YTM) seems attractive. But there are still some good deals – last week I got 5.3 YTM on AA bond that matures in 2024. I just check and at least on NY state bonds (I live in NY state) YTMs are around 4% for AA and AAA bonds that mature within next 5 years, and over 5% for those that mature around 2024. Keep in mind that the interest is free from federal and, as long as you buy your state’s bonds, state taxes as well. So, for me in my 28% bracket and high tax state, 5.3% tax-free is almost the same as 8% taxable.

I know the maturity in 2024 is a long way away, so it’s probably not a good choice for an emergency fund. You can always sell bonds, although if you sell before maturity you’ll do it for the current value which can be above or below what you paid for it. As long as the interest rates keep going down, the bond values are likely to keep going up, though.

Also, this is simple interest, not compound interest, but as you get interest paid to you twice a year, you can simply invest it in something else. Something to look into, anyway. There is a little risk, but as long as you keep to AA and AAA bonds, the risk is small.

There are some good deals in corporate debt as well, but it’s riskier – it’s difficult to know every detail of companies’ balance sheet. I was considering American Express bonds that paid over 10% last time I checked, but there was a negative credit watch on the company. Not sure how it changed now that it is a bank holding company.

You need to have a certain amount of money to buy individual bonds, though – most of the bonds have 5K minimum purchase requirement. But it is an option if you are looking for a place for your money that is less risky than stocks yet want bigger returns than CDs.

Given that some data points to the government intentionally low-balling inflation, doesn’t this make the use of those CDs even more questionable?

I mean, sure, you have to keep around a couple of thousand in cash. But @Sam has to jump through hoops to basically break-even.

I know that people here are gun-shy and don’t want to lose money in the market. But right now, all of the above-listed investment vehicles are actually going to lose you money. (Jim can we get that as a caveat?)

Also, given that the only way for Barack to maintain his promises is to print more money, doesn’t it seem like a safe bet that we’re going to see more inflation?

But I am still curious on what you mean….for my own understanding..

@Sam: Those rewards checking accounts are really nice but a lot of them have really stringent requirements, which is something to be aware of. 10 debit transactions is a lot in one month and debit transactions are often not as “good,” but that’s not a good reason NOT to take advantage of those offers.

I always thought of commenting but never had a chance to! I thought one thing you would find really interesting is that a local bank in our town has a checking account that gives 6.01%(APY), 5.875%(APR) interest (for balances upto 25,000). You just have to “meet” certain requirements like use your debit card at least 10 times a month, login to your bank account at least once a month, and have either a direct deposit or direct withdrawal from the account and voila you get to make that extra cash! I have been reaping the benefits since about Feb this year and I am hoping all this economic downturn won’t make the bank change its interest rates ! It hasn’t so I have my fingers crossed. I even took money out of CDs (when they matured) and money market accounts and put it all in this bank. I thought you would find this fascinating!

I wonder if there is a Money Market account out there with a similar rate if not higher. If you could find a Money Market account just a quarter point or two below the max CD rate you could find, would you put your money in the Money Market account instead to maintain liquidity?

Larry