The Amazing Decling I Bond Interest Rate

by Dual Income No Kids on May 2, 2009 · 0 comments

Hi All,

This morning I popped over to treasurydirect.gov to check the rate on savings bonds. The treasury has cut the rate on inflation (I bonds) savings bonds to 0%. Thats right, zero, zilch, nada. If you loan your money to the government for this product, you get nothing.

This comes on the heels of a number of other actions by the federal government to reduce bonds sales, including cutting the savings bond marketing budget, lowering the minimum amounts for Treasury Bills, eliminating on-line credit card purchases of savings bonds, etc, etc. (1).

Frankly, this is a sharp stick in the eye for small investors and savers. The minimum on I bonds is 50 dollars, which is affordable even for the working poor. Also the previous rate was 5.46, not great but better than most comparable products.

Part of the reason for the decline is that the central bank is concerned more about deflation that inflation. The I bond has two rates, an inflation component and a fixed rate. The inflation component is at -2.78 which makes sense since inflation is low, but the fixed rate is .10. One would have assumed that they would have at least kept a marginal small positive rate, given that so many individuals in the US are active buyers of I bonds. Instead, they are not where you want to put your wealth right now.

Best,

James

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