I bond fixed-rate zero; new EE-bonds to earn 0.20%
Thursday, November 1st, 2012
Categorized as: Savings Bond interest rates • Series EE US Savings Bonds • Series I US Savings Bonds
The Treasury announced today that I bonds issued from today through the end of April 2013 will have a fixed-rate of zero. This is the fifth Savings Bond rate announcement in a row setting the I bond fixed rate at zero.
As we announced earlier, the I-bond inflation component for bonds entering new rate periods during the next six months will be 1.76%.
Normally the Treasury tries to keep about a 1 percentage point difference between the fixed rates for I bonds and 10-year Treasury Inflation Protected Securities (TIPS). However, yesterday the fixed-rate on 10-year TIPS was -0.78%. Thus the spread today is -78 basis points, which is a new record. The previous low was -30 basis points and was set six months ago. (One percentage point is 100 basis points.)
The rate on new EE bonds will be fixed at 0.20% for 20 years. This is also a record low rate for fixed-rate EE bonds. If you can invest in these and hold them for 20 years, at which point their double-value guarantee will give you a rate of 3.50%, they are one of the best Treasury investments currently available (yesterday the rate on 20-year Treasury Bonds was 2.46%).
Keep in mind that the new interest rate for your I bonds will not necessarily begin in November. Instead, new rate periods begin every six months starting with the month in which your I bond was issued. So, for example, an I bond issued in July begins new rate periods in July and January.