Savings Bond rate vs yield

Tuesday, March 29th, 2005
Categorized as: Savings Bond interest rates

The Savings Bond Wizard shows that for an EE bond issued 09/1992, the rate is 4.00% and the yield is 5.92%. For an I bond issued 01/2003 the rate is 4.28% and the yield is 3.51%. I don’t understand why rate and yield are different. How they are computed? Why is the I bond yield less than rate and EE bond yield more than the rate?

Tom’s response

First you have to realize that the interest rates paid by Savings Bonds can change every six months.

The rate shown by the Wizard is what a bond is earning in its current six-month rate period.

The yield is how much it’s earned, expressed as an annual interest rate, since the day you bought it.

If interest rates go down over the life of a bond, as they have for your ’92 EE bond, the lifetime yield will be higher than the current rate.

If interest rates go up over the life of a bond, as they have for your ’03 I bond, the current rate will be higher than the lifetime yield.

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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:

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June 1, 2010

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Virtually every question about Savings Bonds has been asked and answered on this site multiple times. Use the search feature (see the box in the gray area near the top of this page) or the detailed menu on the lower part of the home page to find the information you're looking for. If you have a copy of Savings Bond Advisor, you can ask me a question here.

Tom Adams

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