Savings Bond Alert #005

Treasury assistance for Hurricane Frances

The Treasury will assist victims of Hurricane Frances by expediting the replacement or payment of Savings Bonds. The emergency procedures are effective immediately and will allow authorized banks to redeem Series EE and I savings bonds that are less than one year old, for residents of the affected areas, through the end of October 2004.

The counties in Florida affected include: Brevard, Broward, Citrus, Glades, Hernando, Highlands, Indian River, Lake, Martin, Miami-Dade, Okeechobee, Orange, Osceola, Palm Beach, Pasco, Polk, St. Lucie, and Sumter.

The Treasury will also expedite the replacement of bonds lost or destroyed. Bond owners should complete form PD F-1048. There’s a link to this form on the Forgotten, Stolen, Lost, or Destroyed Savings Bonds page on our web site. Bond owners should write the word “DISASTER” on the front of their envelopes to help expedite the processing of claims.

Savings Bond interest rate forecast

Based on prevailing interest rates since the Treasury’s May 1 interest rate announcement for Savings Bonds, it appears rates will be higher during the next rate period.

If current trends contine, the Series EE bond rate for rate periods beginning November 2004 through April 2005 will be in 3 to 3.5 per cent range. The EE rate is set at 90% of the average 5-year Treasury yield from May 1 to October 31. Through the end of August this creates a new EE rate of 3.36%.

For Series I Savings Bonds, the inflation rate component, which is based on the Consumer Price Index, is also running above 3% through the end of July. This means that Series I bonds issued before October 2001, which all have a fixed-base rate of 3% or more, will be earning over 6%.

The fixed rate component isn’t fixed by formula, but is loosely related to yields on TIPS. Based on current TIPS rates, we can expect the fixed-rate component for new I bonds to stay at its current 1% or rise slightly.