Why are There Two Rates for my Savings Bond?

After weeks of researching, saving, planning, and finally purchasing you still have many unanswered questions about the US Savings Bonds you have purchase. Like why are there two rates for your Savings Bond, seriously what is that all about?

The first things you need to figure out is: why is there multiple interest rates on your savings bonds, what series your savings bond is, and when it was issued. For example, if you are an owner of an I Series Savings Bond – the interest rate is derived from a combination of a fixed rate and a semiannual inflation rate. Make sure you don’t confuse the two when calculating your return. According to TreasuryDirect, the US Treasury’s website:

A fixed rate of return, which remains the same throughout the life of the I Bond.

A variable semiannual inflation rate based on changes in the Consumer Price Index for all Urban Consumers (CPI-U). The Bureau of the Public Debt announces the rates each May and November. The semiannual inflation rate announced in May is the change between the CPI-U figures from the preceding September and March; the inflation rate announced in November is the change between the CPI-U figures from the preceding March and September.

Additionally, you may see two rates for your Savings Bond, if you own the EE Series as depending on when you purchased them; they each earn a different rate of return. That breakdown of rates is done by time and is as follows:

Series EE bonds, issued from November 2008-April 2009 earn a fixed rate of 1.30%

Series EE bonds, issued from May 1997-April 2005 earn 2.80% rate based on market-based interest rates set at 90% of the average 5-year Treasury securities yields for the preceding six months

Please note this specific rate information is current as of the November 1, 2008 The Bureau of the Public Debt reports.

There are several reasons for why there may be two rates for your Savings Bond . Make sure to find out which bond you have, know the issue date, and then you can find the proper answers.