The US Treasury just announced that it is raising the the fixed rate on Series I Savings Bonds to 01.%, up from 0.0%. This creates a composite rate of 1.64% for I Bonds purchased from today through April 30, 2016. Here is the announcement:
The composite rate for Series I Savings Bonds is a combination of a fixed rate, which applies for the 30-year life of the bond, and the semiannual inflation rate. The 1.64% composite rate for I bonds bought from November 2015 through April 2016 applies for the first six months after the issue date. The composite rate combines a 0.10% fixed rate of return with the 1.54% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The CPI-U increased from 236.119 in March 2015 to 237.945 in September 2015, a six-month change of 0.77%.
Although no one will get rich earning 0.1% above inflation, this is welcome news for I Bond investors. The fixed rate has been 0.0% since November 2014. In the six months ending Oct. 31, the inflation-adjusted rate for I Bonds was -1.60%, resulting in a composite rate of 0.0%.
Also, the Treasury said that EE Savings Bonds issued from today through April 30, 2016, will earn a permanent fixed rate of 0.1%. This is down from 0.3% offered for the last six months. Most importantly, however, the Treasury retained its policy of double-principal if held for 20 years, creating a 20-year term that pays 3.5%, very generous in today’s market. Here is the announcement:
All Series EE bonds issued since May 2005 earn a fixed rate in the first 20 years after issue. At 20 years, the bonds will be worth at least two times their purchase price. The bonds will continue to earn interest at their original fixed rate for an additional 10 years unless new terms and conditions are announced before the final 10-year period begins.
Today’s announcement adds to the appeal of I Bonds and retains the appeal of EE Bonds. Pretty good news for investors.