Comparing the Rates of Savings Bonds

Comparing the rates of savings bonds is important prior to purchasing. Government-issued savings bonds are typically the safest form of investment because they are backed in good faith by the U.S. government. Be sure to research the different bonds offered, their rates and how these bonds are affected by different economies.

Different Bonds

The government offers a few different savings bonds. One type of bond is the Series EE Bond. These are popular because you can purchase them at half of their face value. When these bonds mature after 20 years, you will receive the face value of the bond in addition to the interest accrued. The next bond is a Series I Bond, which matures 30 years after its issue date. These bonds are purchased at their face value, and the amount of money they accrue is based on inflation-indexed earnings in combination with a fixed rate. Series HH bonds are no longer eligible for purchase, but if you have one in your possession, you will still be able to cash it in at its date of maturity, 20 years from its date of issuance.

Savings Bond Rates

The interest rates for the above savings bonds are posted semiannually. Currently posted rates are from November 1, 2009, until April 30, 2010. If you purchase a bond within this time frame, it will be subject to the rates listed in this article. The next set of rates will come out on May 1, 2010, and continue until October 31, 2010. Currently, the rate for purchasing a Series EE bond is 1.20 percent, which is .50 percent higher than it was in the previous six months. The rate of a Series I bond is 3.36 percent, which is up 3.36 percent from the last period. Lastly, are the Series HH bonds; at a rate of 1.5 percent, they have stayed the same as in their prior period.

Economy and Savings Bonds

A positive feature of the above savings bonds is that they are one of the safest forms of investment in a down economy. The Series EE Bonds appear to be affected less by the economy than the Series I Bonds since they are at a fixed rate that compounds semiannually. The Series I bond is composed of a fixed rate in addition to a component equal to the rate of inflation. The benefit to this bond is that if the economy improves, the rate will go up. If, however, the economy and inflation decrease, so will your rate of return. The economy also affects the interest rates of these bonds. As a result of these bonds' posting semiannually, you have an opportunity to wait in purchasing a bond with hopes the rates will increase.

Prior to investing in a bond, it is important to clarify which bond you are interested in and what its rate of return is. Note that there are penalties placed on these bonds if they are cashed in before 5 years' time.

blog comments powered by Disqus