Callable Agency Bond for upcoming purchase

[lvswts]

I have a pretty large purchase coming up in about 1 year. I'm tempted to purchase a 20 year Federal Home Loan Bond with a 1st call date of about 11 months from now. The HOPE is the bond gets called. I have the money to set aside today for the purchase a year from now and I want to put it in a safe place and get some interest while I wait the year.

Any experience with how likely these types of bonds have been called lately? It wouldn't break me if the bond did not get called as I could get the money from somewhere else but I thought I could get an extra 1.8% interest (versus 1 one year Treasury Bill).

Any thoughts on doing this? Is a hope that it gets called worth the extra interest? I would be fine if I had to hold it for 20 years, but I would hope I don't given what I intend to do with the money.

[retired@50]

Any thoughts on doing this?

Have you considered what you'd do if interest rates rise over the next year?

Personally, I'd stick to something that matures shortly before I needed the money.

Regards,

[ofckrupke]

I have a pretty large purchase coming up in about 1 year. I'm tempted to purchase a 20 year Federal Home Loan Bond with a 1st call date of about 11 months from now. The HOPE is the bond gets called. I have the money to set aside today for the purchase a year from now and I want to put it in a safe place and get some interest while I wait the year.

HOPE is not a plan. And these trade with very wide spreads on the secondary market compared to treasuries; if it is not called you will lose something comparable to your year's spread over treasury debt over the year, or more, in the sell transaction, even if the interest rate environment then is as it is now. If yields are higher on 19Y then it will be even worse.

It wouldn't break me if the bond did not get called as I could get the money from somewhere else

...where it is now risklessly invested? At what cost to liquidate? At what tax cost? If this alternate source is without risk or cost to access then why not make that plan A and invest the present bolus according to your IPS without regard to the short horizon spend plan.

So, probably a bad idea given the planned spend. Just get last month's or this month's 52week t-bill on secondary market if you can't find a CD with a higher after-tax yield given your expected Fed and state tax marginal rates.

[lvswts]

ok. Sounds like a bad idea. The money right now is in cash. I'll probably buy a Treasury note and go for the sure thing versus trying to squeeze out an extra 1.8%.