New EE US Savings Bonds To Be Fixed Rate

[jeffrey]

The US government, in a quest to save itself money, will begin paying a fixed interest rate instead of having the interest rate adjusted every 6 months for new EE Savings Bonds. The new fixed rate will begin May 1, 2005. While the change will save the government money, it will likely result in lower returns for investors as they will not benefit from the current rising interest rates.

Under the current system, The interest rates paid on EE Savings Bonds are based on the rates of five-year Treasury notes and adjusted every six months. Under the new system beginning May 1, the interest rate in effect when the person purchases the EE Savings Bond will remain the same for the entire period they own the bond. The fixed rate will not be based on five-year Treasury notes, but based on ten-year Treasury notes.




The change won't affect any EE Savings Bonds purchased prior to May 1. The interest rate on the pre-May 1 savings bonds will continue to be adjusted every six months. Currently EE Savings Bonds are paying an interest rate of 3.25%.

The fixed interest rate change is for the EE Savings Bonds only and will not affect the US government inflation-adjusted Savings Bonds or I Bonds. I Bonds have a fixed rate for the life of the bond, but also adjust the interest rate taking into account inflation ever six months. Currently I Bonds are paying an interest rate of 3.67%.