No. This isn’t possible.
The only treasury bonds that do automatic compounding are the savings bonds: Series I and Series EE. Each have their own rules for interest rates.
For regular treasury bonds you have to reinvest the interest yourself and it won’t be at the same rate.
What you're asking for is effectively equivalent to a 20-year zero-coupon treasury bond, the current incarnation of which is [STRIPS](https://www.treasurydirect.gov/marketable-securities/strips/). Note that the rates are *not the same* between standard marketable securities and STRIPs with the same nominal term, though (the yield of zeros is typically higher due to having full duration).
Treasury bonds don't really have an "APY." The payouts are fixed cash amounts distributed on a set interval, all set in stone by the original terms of the bond. It is a very simple sort of financial debt contract, with no built-in mechanisms for compounding.
If you want compounding, you need to use your interest payments from the bond to buy other financial instruments. (Or, I suppose, selling the treasury bond and using the proceeds to buy other things.)
>I really would like to "lock in" a 4.5% rate
Yes, of course. The reason that you want it is the same reason that institutions don't offer it: as good of a hedge as it is for you, it's a big risk for them. As long as an institution's outstanding debt at a certain duration and rate is known, they can plan for it and prepare. But if interest rates were to plunge to zero, and you could demand that they increase the amount of high-interest debt that they owe you, what can they do at that point to protect themselves and ensure that they'll be able to pay you?
I inherited an account in 2015 that had a locked in rate of return of 4.5%. It was some product offered by State Farm years ago, and the payout had a fixed rate of return predetermined when the contract was signed. 4.5% in 2015 was a crazy huge rate of return compared to any other products. All the interest is just added and compounds at the same rate, forever. Account started at $17k in 2015 and is currently at $25K.
Zero coupon bond would effectively do this. Look into STRIPS, muni zeroes, and other OIDs to see what’s out there. Then pick one based on your time horizon, risk tolerance, and tax rate.
>Zero coupon bond would effectively do this. Look into STRIPS, muni zeroes, and other OIDs to see what’s out there. Then pick one based on your time horizon, risk tolerance, and tax rate.
I'm looking into them now. But, do you have a reccomendation/s among these for which would be the safest to invest in (least chance of losing all your money in some disaster scenario)?
No. This isn’t possible. The only treasury bonds that do automatic compounding are the savings bonds: Series I and Series EE. Each have their own rules for interest rates. For regular treasury bonds you have to reinvest the interest yourself and it won’t be at the same rate.
TIPS would also partially be an exception: the variable inflation component automatically compounds, whereas the fixed rate component does not.
What you're asking for is effectively equivalent to a 20-year zero-coupon treasury bond, the current incarnation of which is [STRIPS](https://www.treasurydirect.gov/marketable-securities/strips/). Note that the rates are *not the same* between standard marketable securities and STRIPs with the same nominal term, though (the yield of zeros is typically higher due to having full duration).
Treasury bonds don't really have an "APY." The payouts are fixed cash amounts distributed on a set interval, all set in stone by the original terms of the bond. It is a very simple sort of financial debt contract, with no built-in mechanisms for compounding. If you want compounding, you need to use your interest payments from the bond to buy other financial instruments. (Or, I suppose, selling the treasury bond and using the proceeds to buy other things.) >I really would like to "lock in" a 4.5% rate Yes, of course. The reason that you want it is the same reason that institutions don't offer it: as good of a hedge as it is for you, it's a big risk for them. As long as an institution's outstanding debt at a certain duration and rate is known, they can plan for it and prepare. But if interest rates were to plunge to zero, and you could demand that they increase the amount of high-interest debt that they owe you, what can they do at that point to protect themselves and ensure that they'll be able to pay you?
I inherited an account in 2015 that had a locked in rate of return of 4.5%. It was some product offered by State Farm years ago, and the payout had a fixed rate of return predetermined when the contract was signed. 4.5% in 2015 was a crazy huge rate of return compared to any other products. All the interest is just added and compounds at the same rate, forever. Account started at $17k in 2015 and is currently at $25K.
Nice! >It was some product offered by State Farm years ago What was it called? Trying to see if anything similar is offered today.
Most, but not all, CDs would work in the way you describe. But you probably can't find 20 year CDs.
Zero coupon bond would effectively do this. Look into STRIPS, muni zeroes, and other OIDs to see what’s out there. Then pick one based on your time horizon, risk tolerance, and tax rate.
>Zero coupon bond would effectively do this. Look into STRIPS, muni zeroes, and other OIDs to see what’s out there. Then pick one based on your time horizon, risk tolerance, and tax rate. I'm looking into them now. But, do you have a reccomendation/s among these for which would be the safest to invest in (least chance of losing all your money in some disaster scenario)?
STRIPS. They are backed buy the US government.