Earlier this year, I foolishly bought some EE bonds right before the treasury dept changed their interest rate from floating to fixed. My thinking was that the treasury was doing this do save money, so I should jump in and grab the floating rate bonds before it was too late. Of course, now those EEs are paying a paltry 3.5% which is even less after taxes (deferred for up to 30 years, but still). I have plenty of I-bonds that I'd like to keep.
My question is, should I cut my losses and cash the EEs in as soon as the year holding period is up, eat the 3-month interest penalty, and put them to use someplace more productive? I would keep these funds in a low risk investment, like the vanguard intermediate term muni fund which is yielding about 4% tax-free (5.0% effective pre-tax). I would DCA in to avoid getting hosed by any sudden shifts in the yield curve.
My question is, should I cut my losses and cash the EEs in as soon as the year holding period is up, eat the 3-month interest penalty, and put them to use someplace more productive? I would keep these funds in a low risk investment, like the vanguard intermediate term muni fund which is yielding about 4% tax-free (5.0% effective pre-tax). I would DCA in to avoid getting hosed by any sudden shifts in the yield curve.
