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New Savings Bonds Rates - Fixed and Inflation Rates Are Low


New Savings Bonds Rates - Fixed and Inflation Rates Are Low

The Treasury released the new I Bond and EE Bond rates today. New rates are announced on every first business day of May and November. Unfortunately, the rates continue to be disappointing. The I Bond fixed rate remains at 0.10%, and the I Bond inflation rate is 0.16%. This results in a composite I Bond rate of 0.26%. Note, the composite rate is typically the sum of the fixed rate and the inflation rate, but it has a floor rate of 0%. The I Bond inflation rate went down considerably from November when it was 1.54%. The low gas prices is probably the main reason for this drop.

The Treasury also kept the EE Bond rate the same at 0.10%. With this low rate, in my opinion, 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%.


I Bond Rates:
Composite Rate: 0.26%
Fixed Rate: 0.10%
Inflation Rate: 0.16%

EE Bond Rate: 0.10%

Rates effective May 1, 2016 through October 31, 2016

I had hoped we would see an increase on the I Bond fixed rate, but the chance of an increase was small. The highest the fixed rate has been in the last six years is 0.20%. That was from November 2013 to April 2014. For most of the time in the last six years, the fixed rate has been 0%.

Current I Bond Holders

If you have old I Bonds, you'll have six months of rates that range from 0.16% (for I Bonds with a fixed rate of 0%) to 3.76% (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 six months with the 0.16% 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 0.16% inflation rate won't take effect on that I Bond until October 2016.

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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Anonymous   |     |   Comment #1
What????? Shocking!! Rates went down!!!!  All of you "savers" can just forget it. Rates will never go up again. What does it take for you people to get it???? The debt will never allow rates to ever be increased again. NEVER!!!! All this talk about maybe rates will go up....maybe not is all just complete lies. It's a game to keep your attention and hopes. All of you are Charlie Brown thinking he will finally get to kick the football. Just lock in a rate now and forget about it. A long term CD 10-15 years. Best you will ever do. I would do it soon too.....Negative rates will here soon.
Anonymous   |     |   Comment #3
You're beginning to make some sense and that is scary indeed. lol
Anonymous   |     |   Comment #2
I liken these pathetic rates to the digital television scam. Remember a few years ago when they switched over to digital TV? Made everyone do it and claimed it would be so much better? Well......the reception is lousy and it's done to force you into pay TV........Interest rates are the same. They want you to risk your $$$$ in the stock market or bonds so Wall St executives will get higher bonuses.
Gaelicwench   |     |   Comment #5
Thank you! That's exactly why I won't "play" the market; I equate it to playing the slots....the market is and always has been rigged. CDs are the way to go if you're lucky enough to find decent rates....
Anonymous   |     |   Comment #8
still here gaelic how are things in pitts burg these days do you need your brolly much
Anonymous   |     |   Comment #9
is paoli or scotty j still around 
Barabbas   |     |   Comment #10
lol, that's why you don't "play" with money. The stock market, accessed through low fee indexed mutual funds, is the best long term investment. It will always outperform CDs, given a long enough timeline.
Anonymous   |     |   Comment #4
we should not buy any govt bond until yellen raises rates,let the govt starve just like savers for over 10 years
Barabbas   |     |   Comment #11
wtf are you talking about? You know the Federal Reserve "sets" interest rates the same way OPEC "sets" oil prices, right? They make public statements and take market operations to set the price (inverse of yield) where they want. You can't force anyone to pay more than they want and why would you sell something for less than you could? Should the FRB sell 10 year bonds for less than the market is willing to pay? The only interest rate the FRB can actually set directly is the overnight funds rate paid on excessive bank reserves. If the Fed raised those interest rates excessively, it would starve credit markets as banks raise money (sell assets) to hold overnight at FRB, thereby guaranteeing an economic crash. I get as a saver low interest rates suck, but pay attention to what that actually means. Interest rates are the cost of borrowing money. If interest rates are low, then the prices are high. Somehow decreasing supply (that is, limiting federal debt) is supposed to decrease prices? GTFO and read a book.
jimbeau   |     |   Comment #6
When you "Anonymous" folks start comparing interest rates to HD TV it is indeed scary!
Barabbas   |     |   Comment #12
What do you expect? It's a bunch of old people reminiscing on how it was back before Reaganomics destroyed the middle class. Remember 15% interest rates? Remember how Ronald Reagan and Paul Volcker decided to destroy labor markets (make it so "no worker dares ask for a raise") to control inflation? Remember how the velocity of money peaked, and has since waned to prewar levels? Economy good? That's because of the "free market" and libertarian (plutocratic) policies. Economy bad? Must be those liberals advocating for big government. Better make sure to defund welfare to fund tax cuts.
DCGuy (anonymous)   |     |   Comment #13
Yes, I remember how rates skyrocketed to near 15% for 30 year Treasury bonds back in the mid-1980s.  I remember when air traffic controllers tried to strike against the Government and lost (PATCO).  I remember the big dot com bust in 2000 and the subprime mortgage near meltdown in 2008.  I also remember the 1973 Arab Oil embargo and those long gas lines and you could only buy gas depending if your plate ended with an odd or even number.  Gas was about 35 cents to the gallon and has never returned back that level.
Anonymous   |     |   Comment #7
Until the fixed rate gets to at least  equal to a savings account rate (currently about 1%), I am not interested in IBonds.