The US Treasury offers two categories of government securities available for investment options for US citizens. The government offers marketable treasury securities that are available to be traded on the secondary market. Additionally there are non-marketable Treasury products, such as I Savings bonds, that are issued to individuals and are not a traded.
The history of all bonds, including the I Savings bonds can be trace back to the first bond called Liberty bonds. Liberty bonds were developed as a way for our government to fund the expenses of fighting World War I. Previously the government was able to finance wars by borrowing from other countries, but at that time there was no one to borrow from. The solution was borrowing directly from the country's citizens and offering them a financial incentive to provide the loan. The initial bonds caused some more crises for the government when they all matured.
Over time, bonds were redesigned to avoid any additional financial crunch on the US Treasury system. Since the mid 1930's, the government has sold savings bonds to generate low cost loans to help build their reserves. For the privilege of borrowing taxpayer's money, the government will pay interest and even offer tax incentives for those who are cashing in their matured bonds. At that time bonds were issued in an alphabetical order and today individuals can purchase I Savings bonds.
For series I Savings bonds purchased from November 2008 - April 2009 the Treasury announce interest rates to be 5.64%. The I Savings bonds are issued at face value and have a changeable yield based on inflation. The current interest rate (and all interest rate for this type of bond) is determined on two factors. First, there is a constant fixed rate for the life of the bond, and second, there is a variable rate that changes every six months. The adjustable rate is based on inflation and goes into effect May 1, 2009 and November 1, 2009 annually.
