On the surface United States (US) Treasury savings bonds may appear to be consistent as they are issued by the federal government. Question is, Why do bond rates differ so much ? There are several factors contributing to the rate fluctuations.
Bonds issued by the US Treasury started off being issued with regularity in the mid 1930’s. In that time period bonds were issued in alphabetical order, starting with the A series and now running through the I series – which is available to investors for purchase now. Bond rates differ so much from one another due to the time they were issued and the type of interest they accrued.
For example, EE series bonds bought on or after May 1, 2005, generate a fixed rate of return. However, those EE Bonds bought between May 1997 and April 30, 2005, are valued on a 5-year Treasury security yields and generate variable market-based rate of return. Two times a year (May 1 and November 1) the government announces the earnings rates based on the variable Consumer Price Index. So even though the same series bonds are called by the same name the bond rates differ because of the date they were issued and purchased plus the contributing factors of a fluctuating market.
The I Bond Series is also a current investment option and their bond rates differs from the EE series because they were set up differently from the beginning. Their annual interest rates are derived from the combined effects of a fixed rate and a semiannual inflation rate plus they are an accrual-type security.
If investors were looking to diversify their portfolios, an assortment of bonds would be a decent strategy because bond rates differ. By buying an assortment of bonds one can take advantage of the interest rate of all the options available.