I bond fixed rate held at 1.40%; EE 3.60%
Wednesday, November 1st, 2006
Categorized as: Yesterday's News (old post archive)
The Treasury will hold the fixed interest rates it will pay on Series I Savings Bonds issued during the next six months steady at 1.4%, it announced this morning.
For Series EE Savings Bonds, the fixed rate will be 3.60%, down from the previous 3.70%.
During their first six-month rate period, I bonds issued beginning today will have a composite rate of 4.52%. The inflation component, which changes every six months for all I bonds, will be 3.10% 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 4.12% for I bonds with the lowest fixed base-rate of 1.00% to a high of 6.76% 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, now lags even further 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 4.39% during their next six-month rate period, up from 4.11% previously.
(Average rating: 5 stars)
Loading ...
Ah, I knew I should have waited one more day for that purchase! Oh well, worse things have happened than 2.41% for the next 5 months I guess…
Tom,
I was new to I bonds about this time last year and bought about $500 or so during the 6.73% composite (with 1.0% fixed rate). Is it worth going to the trouble as these bonds turn one year old of cashing in and reinvesting at the higher rate?
John,
Basically, you're getting 0.4% additional interest in exchange for (1) an extra year of being subject to the five-year early withdrawl penalty and (2) a sacrifice of three months of interest at the most recent lowly 2.01% rate. That tradeoff will pay off for you more the longer you hold the I-bonds.
The sacrifice to upgrade your I-bond is so small that, unless you know you're going to need to redeem the money within a year or so, I'd suggest you make the exchange.
I want to buy bonds today to save for my son's college expenses, but don't know which kind to purchase. Any advice? He is 11 years old. Thanks!
Monica - the only choice is between EE and I bonds. Historically I bonds have outperformed EE bonds.
You need to get the registration correct if you want to use these for your son's college expenses. I recommend you read my page on the savings bond college education deduction.