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Treasury Lowers Rates for I and EE Savings Bonds


Treasury Lowers Rates for I and EE Savings Bonds

The Treasury released the new I Bond and EE Bond rates on Monday. The Treasury decreased the I Bond fixed rate from 0.10% to 0.00%. The I Bond inflation rate decreased from 1.84% to 1.48%. This inflation rate is very close to what I calculated on October 25th. That results in an I Bond composite rate of 1.48%. If you decided to buy an I Bond in October, you made a good choice. I was worried that the fixed rate might fall to zero with the recent decline in Treasury yields. The fixed rate had been zero for three years from 2010 to 2013.

The Treasury also wasn’t kind to EE Bonds. Its rate decreased from 0.50% to 0.10%. With such a low rate, the only reason to purchase an EE Bond is if you’re planning to hold it for 20 years. In that case, the EE Bond is guaranteed to double in value. This is equivalent to an annual return of about 3.5%.

Current I Bond Holders

If you have old I Bonds, you'll have 6 months of rates that range from 1.48% (for I Bonds with a 0% fixed rate) to 5.11% (for I Bonds with a 3.60% fixed rate). Back in the good old days, the I Bond fixed rates used to be above 3.00%. The highest I Bond fixed rate was 3.60% during the period from May 2000 to October 2000. If you have any of those I Bonds, you'll want to keep them as long as you can. They will mature after 30 years from the issue date. You can see the entire history of the fixed rates in this TreasuryDirect page.

Remember that the 6 months with the 1.48% inflation rate may not begin this month. It depends on when you purchased the I Bond. An I Bond's new inflation rate takes effect every six months after its issue date. So if you purchased an I Bond on April 2012, the 1.48% inflation rate won't take effect on that I Bond until April 2015.

Series I Savings Bond Features

Below is a summary of the I Bond features. More information is available at this Treasury Direct I Bond page:

  • Can't be redeemed within 12 months of issue date
  • Lose 3 months interest if redeemed within 5 years
  • Interest is composed of fixed and inflation-based rate
  • Fixed rate remains for life of bond
  • Inflation-based rate changes every 6 months after issue date
  • New rates announced every six months on November and May 1st
  • Federal tax can be deferred on interest until bond is redeemed
  • Interest is exempt from state and local tax
  • Some or all interest is tax exempt when used for educational expenses
  • Maximum purchases per year and per social security number is $10,000 in TreasuryDirect and $5,000 in paper bonds purchased with IRS tax refunds (This excludes trust/business purchases) - total was $60,000 before 2008 (Treasury's press release).

For more details about the purchase limit, please refer to the Treasury's press release on the new annual purchase limit and the Treasury Direct's purchase limit FAQs.

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