New I bond fixed rate 1.30% – EE 3.40%
Tuesday, May 1st, 2007
Categorized as: Yesterday's News (old post archive)
The Treasury will lower the fixed interest rates it will pay on Savings Bonds issued during the next six months, it announced this morning.
For Series I Savings Bonds, the fixed base-rate will be 1.30%, down from the previous 1.40%. For Series EE Savings Bonds, the fixed rate will be 3.40%, down from the previous 3.60%.
During their first six-month rate period, I bonds issued beginning today will have a composite rate of 3.74%. The inflation component, which changes every six months for all I bonds, will be 2.42% 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 3.43% for I bonds with the lowest fixed base-rate of 1.00% to a high of 6.06% 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, continues to lag well 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 4.15% during their next six-month rate period.
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Tom Adams
Looks like they do not want Americans to buy the bonds.
It would be helpful if the Treasury Department had a “transparent” method for determining the fixed rate component for the I Bond. It is hard to determine if this is market driven at all.
Well, this isn’t a huge hit on this go-around, but it does continue the downward trend of “administratively” assigned fixed rates. If the demand for savings bonds continues to drop, as seems likely following this announcement, is it possible that either series is headed the way of HH bonds, discontinued due to lack of interest?
Robert – Although you can’t depend on the Treasury to continue this, lately it has consistently set the I bond fixed rate 95 to 100 basis points below the current 10-year TIPS rate. See the table at the bottom of my I bond fixed rate page.