New Savings Bonds Rates - I Bond Fixed Rate Rises to 0.50%

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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. The I Bond fixed rate increased 20 bps to 0.50%. This is the highest the fixed rate has been since 2009. As I had calculated three weeks ago, the I Bond inflation rate is 2.32%. This results in a composite I Bond rate of 2.83%.

Yet again, the Treasury 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%.

Summary:

I Bond Rates:
Composite Rate: 2.83%
Fixed Rate: 0.50%
Inflation Rate: 2.32%

EE Bond Rate: 0.10%

Rates effective November 1, 2018 through April 30, 2019

The size of the increase in the I Bond fixed rate is small, but any positive increase is noteworthy since the fixed rate has been stuck at such low levels for the last decade. Also, this continues a trend of the fixed rate rising. This 20-bps increase of the I Bond fixed rate matches the increase last May when the fixed rate went up from 0.10% to 0.30%. The fixed rate finally began to rise a year ago when the fixed rate increased from 0.00% to 0.10%.

The last time the I Bond fixed rate was above 0.50% was from November 1, 2008 to April 30, 2009. The fixed rate spiked to 0.70% during this time, but that didn’t last. This was the time the economy was hit hard by the financial crisis, and the Treasury decided to slash the fixed rate to 0.10% on May 1, 2009. From that point forward until today, the fixed rate never exceeded 0.30%. Most of that time, the fixed rate was zero. Hopefully, the trend of rising I Bond fixed rates will continue in the years ahead. Before 2008, the fixed rate had always been 1.00% or higher.

Current I Bond Holders

If you have old I Bonds, you'll have six months of rates that range from 2.32% (for I Bonds with a fixed rate of 0%) to 5.96% (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 2.32% 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 2.32% inflation rate won't take effect on that I Bond until April 2019.

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.


Comments
Inflation Hawk
Inflation Hawk   |     |   Comment #1
One additional "feature" of iBonds is the fact that if your Treasury Direct account gets hacked and someone steals all of your electronic bonds, the Treasury will not make you whole.

Paper bonds that are lost or stolen will be re-issued to the original owner. Unfortunately, they can only be re-issued as electronic bonds.

So, the government certainly pulled a fast one on Treasury bond holders when it transitioned to Treasury Direct.
QED
QED   |     |   Comment #2
I'm more often than not a contemplative, prudent person. So why do I buy these wacky I bonds? I'm going with "exception that proves the rule". Gosh, I hope I bonds are the sole exception!
Att
Att   |     |   Comment #3
Got reminder today that my EE bond from 1988 had matured today and was now an non interest bearing bond. Logged into my treasury direct account and redeemed the bond to my checking account on record.

The treasury direct site is pretty secure. You have to have a pin sent to your email on record to login. To setup an ACH account you must fill out a paper form and get a bank verification and then mail to the Treasury. Said it would take 2 days for funds to get to my checking account. Hate the keyboard you have to use to enter your password but a friend of mine said that is to prevent key logging.
RZ
RZ   |     |   Comment #4
I have EE Bonds from that time as well. If you don't have a linked checking account is there an option to receive a check from the Treasury?
Att
Att   |     |   Comment #5
Guess you have to call.
Nothing
Nothing   |     |   Comment #6
Most banks redeem bonds but do not sell them...take them to your bank
Att
Att   |     |   Comment #10
#6 Poster #4 has a Treasury Direct account and does not have a linked account to electronically transfer funds for buying or when redeeming. Either he bought bonds after they eliminated paper bonds and/or converted his paper bonds to a treasury account.
calwatch
calwatch   |     |   Comment #7
If one has 0% rate I Bonds bought more than five years ago and has no need for more it is a good idea to consider declaring the interest now and rolling to a 0.50% higher rate for the rest of the life of the bond. You break even after the second year.
Anon
Anon   |     |   Comment #11
Good idea except the new purchase would count against the 10k limit this year. So you could not do both, this "refresh" AND buy another allocation of 10k this year.
whatever
whatever   |     |   Comment #12
Yes - I think I'm going to rollover a 2013 bond with 0% rate into this one for that reason. I could do that this year, and still get the rate next year. I also have a 0.2% rate bond from Jan 2014 that I can close out early next year. The interest is not so high on either that it's going to make much difference to my taxes. I'm not actually buying new ibonds anyway, but I don't mind upgrading the old ones.
Att
Att   |     |   Comment #8
When I purchased my I bonds several years ago you could purchase with a credit card and the purchase amount limits were much higher. I believe 10k is now the limit with some exception with tax refunds. The last I bond I purchased has a 3% fixed rate.
Mak
Mak   |     |   Comment #13
I have some of those, almost 20 years ago now but I think it was $30k a person so $60k husband and wife total.
whatever
whatever   |     |   Comment #14
Yes, when I bought some in 2003, it was $30K per person per year.
DCGuy
DCGuy   |     |   Comment #15
The limit was lowered to $10K per SSN every year in 2012. US Treasury said that the majority of Savings Bond purchasers bought only small amounts. They want the big amount purchasers to instead buy the other forms of US Treasury securities on Treasury Direct website.

https://www.treasurydirect.gov/indiv/research/faq/annualpurchaselimitchangeqa.htm
TennGuy
TennGuy   |     |   Comment #16
Ibonds are tax deferred (you pay tax when you redeem). Basically they want to eat away at your earnings by forcing you to pay tax each year with other securities.
#9 - This comment has been removed for violating our comment policy.
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