Savings Bond Alert #013

Monday, May 2nd, 2005
Categorized as: Savings Bond Alerts

Series I rate 4.80%; new Series EE rate 3.50%

The U.S. Treasury announced today that the initial interest rate for new Series I Savings Bonds purchased during the next six months will be 4.80%, up from the previous 3.67% rate.

The new Series I rate is made up of a 1.20% fixed base rate and a 3.58% inflation component. The inflation component applies to all Series I Savings Bonds and is up from the previous level of 2.66%.

The 1.20% fixed base rate for Series I bonds is up from the previous 1.00%.

Older Series I bonds will earn at least 4.60% and up to 7.24%, depending on issue date, during their next six-month rate period.

The new Series EE Savings Bonds purchased during the next six months will have a fixed rate of 3.50% for 20 years. Fixed rates are a new feature for Series EE bonds.

After penalty for early withdrawal, the yield curve of the new fixed-rate Series EE Savings Bond is:

  • 1 year yield: 2.64%
  • 2 year yield: 3.09%
  • 3 year yield: 3.23%
  • 5+ year yield: 3.53%

Series EE Savings Bonds issued between May 1997 and April 2005 will earn 3.42% during their next six-month rate period. Older Series EE Bonds earn a variety of interest rates, depending on issue date.

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FDIC Insured Certificates of Deposit can pay 1 or 2% more than savings bonds when held for a similar length of time. See top CD Rates Below:

6 Comments

On May 2nd, 2005 Anonymous said:

NIce rate for those I Bonds. Glad I got your alert last month. I was going to invest in April but decided to hold off.
As a long term US Bond investor, I am quite happy. Iuse to buy only EE bonds and only started on I Bonds one year ago. Appreciate your info.
Dano in Calif.

On June 7th, 2005 Anonymous said:

Do you have a similar yield curve for the new I Bonds?

On June 8th, 2005 Tom Adams said:

It’s impossible to do an I bond yield curve because the inflation component changes every six months.

Come back in September after the Consumer Price Index is released. Then I can give you the one-year I bond rate. But even then longer rates can’t be calculated

On June 23rd, 2005 Anonymous said:

I just invested in I bonds. I entered the entire amount as a lump sum. Somewhere in the back of my mind I remember hearing that you should invest in units (i.e., $1000,$5000, etc., because you have to take out an entire unit when you decide to withdraw funds).

On October 26th, 2005 Anonymous said:

In response to the previous anonymous poster, what you described about withdrawing the “entire unit” is only true if you buy paper savings bonds from your bank or a broker.

However, those who purchase electronic savings bonds through the TreasuryDirect website can withdraw any amount of principal over $25, provided there is at least $25 remaining after the transation. (This is, of course, only after the mandatory one-year holding period for EE and I bonds has passed.)

Also, existing paper bonds can be converted to electronic bonds on the TreasuryDirect website, and then partial withdrawls according to the same rules described above would be allowed.

TreasuryDirect website
http://www.treasurydirect.gov/

info on converting paper bonds:
http://www.savingsbonds.gov/indiv/research/indepth/smartexchangeinfo.htm

Cheers!

On October 27th, 2005 Tom Adams said:

Actually, you can also make partial withdrawals with paper bonds, but it’s a real hassle.

For example, if you have a $10,000 bond, you can ask the Treasury to split it into ten $1,000 bonds for you.

You have to cash at least one of the $1,000 bonds, though. They won’t reissue bonds just to change the denominations.

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June 1, 2010

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