This is just a quick note to say that the Treasury has posted the new Series I Savings Bond rates. As I noted previously, the variable portion of the rate dropped from 3.06% to 1.54% as a result of lower inflation. At that time, however, the fixed portion of the rate was still unknown.
Well… TreasuryDirect updated their website with the new fixed rate within the past hour, and guess what? It dropped slightly from 0.3% to 0.2%. That means that new purchases between now and November 1, 2010 will receive a total annualized rate of 1.74%. It also means that I don’t have to regret pulling the trigger right before the rate updates were announced.
Bob: You get the current variable rate (as of when you buy) for six months, and then the then-current rate for six more months. So I got the 3.06% APY variable + 0.3% fixed. That’s locked for six months, at which point it will drop to 1.54% variable + 0.3% fixed for six months, and then… Who knows. It depends on what they announce as the variable rate in November.
Once the rates drop, the bonds immediately reflect the new variable rate right? So by pulling the trigger, you saved the drop on the fixed portion of 0.3 to 0.2.
Now just gotta run that 1.74 rate vs taxed rate on a financial calculator.
You guys didn’t read Nickel’s post did you?
He’s not asking for alternatives..there are good reasons to have I bonds that are outside of interest rate.
I used smartypig to great effect last year to save up for my house down payment. When I got in they were at 3.5%, but quickly fell to 2%. I don’t have a goal open with them right now but I will use them in the future if I need to lock some money away from myself with a good rate. Once again though the interest is taxable in the year it is credited.
I’d suggest taking a look at SmartyPig, a saving account which pays 2.15% APR. Looks very nice.
Will this affect student loan rates for next year? I’ve been considering consolidating to lock in the current low rates, but I don’t know if the rates will be even lower next year.
But CDs don’t adjust for inflation, nor is the interest on a CD tax-deferred (or tax free if you use it to pay for education). There are a lot of different reasons to own Savings Bonds.
CD pays more than that…