I bond fixed rate drops a bit, EE bond rate drops more
Thursday, November 1st, 2007
Categorized as: Yesterday's News (old post archive)
The Treasury announced this morning that the fixed interest rate it will pay on Series I Savings Bonds issued during the next six months will be 1.2%, down from the previous 1.3%.
For Series EE Savings Bonds, the new fixed rate will be 3.0%, down from the previous 3.4%.
During their first six-month rate period, I bonds issued beginning today will have a composite rate of 4.28%. The inflation component, which changes every six months for all I bonds, will be 3.06% for the next six-month rate period.
In their next six-month rate period, older I bonds will pay a variety of rates, depending on issue date, ranging from a low of 4.07% for I bonds with the lowest fixed base-rate of 1.00% to a high of 6.71% for I bonds with the highest fixed base-rate of 3.60%.
The new Series EE bond rate, which is set “administratively” but is based on the average rate for 10-year Treasury securities, now lags even further behind the rates set for EE bonds issued from May 1997 through April 2005. The rate for those bonds is set by formula - 90% of the average 5-year Treasury rate. They will pay 4.11% during their next six-month rate period, down slightly from 4.15% previously.
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Tom Adams
They can keep them. I need a investment that will keep up with Main street inflation not Wall street inflation. Its the so called volatile stuff that hurts the average Joe, not the price of imported toys from China. Stocks & bonds don’t have to eat or drive to & from work.
If I’d only known, I’d have bought I-bonds when the fixed rates were over 3%. I know it’s not the Treasury’s job to look out for consumers (their job is to raise funds), but they aren’t offering a good deal here, and the tax advantages aren’t enough to compensate. I’d rather own stocks and a TIPS fund in a tax-deferred account.
Savings Bonds are now so uncompetitive with bank products. Guess Treasury doesn’t really care about further drops in bond investments…
While it is true that certain bank products offer better rates of return, they also offer risk of default, unlike savings bonds. For example, the so-called money market funds with which so many are chasing higher returns are not FDIC insured and in this unprecedented market environment today, as unlikely as it sounds, may “break the buck” price wise. There is a place in any portfolio for treasury products.
Hi Ted - I agree. Lots of the big-boy money is moving into Treasury securities right now in a flight to safety. You can see it in the way TIPS rates have dropped the last month in the chart on this page.
The Savings Bonds rates already look a lot better than they did on Nov 1.
Tom Adams