[MooreBonds]

Quote:

Originally Posted by burch64 I thought it (Zero-Percent Certificate of Indebtedness) is just a way to adjust your Treasury Direct account without actually transfering it to your checking or savings account. For instance you have the 6 month t-bill, after 6 months they pay it to your Zero-percent account and you turn around and buy another 6 month t-bill without it going to your checking account. If I am correct it makes sense to me.

You are correct in your above illustration...however, in the Treasury's own words, they offer another example: having automatic withdrawal by your employer to be added to your C of I balance to save up to eventually buy a treasury security. So, the treasury is also hoping you'll save up your stash of cash in a zero percent C of I until you have enough to buy a bond...and get an interest-free loan in the meantime.

It's essentially just like a bank that offers checking accounts that pay zero interest, yet also don't charge monthly fees for it...however, you can't bank from the C of I certificates, so it's not a true subsittute (or is the Fed hoping to one day start offering checking accounts? )

--Peter