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Saving Bond investments double

The current 6.73% rate on Series I bonds has created so much new interest in Savings Bonds that the rate of new investments has more than doubled. In December, new investments in Savings Bonds were $1.24 billion - an annual rate of $14.8 billion, compared to fiscal year (Oct-Sep) 2005's $6.3 billion in investments. Investments in both Series EE and Series I bonds have jumped. However, the share of new Savings Bond money that I bonds are receiving is very high. In December, 80.6% of new investments were in I bonds. This is down from November's 87.1%, which was the highest share of Savings Bond investments that I bonds have ever had. November's total investments in Savings Bonds were even higher than December's - an annual rate of $16.1 billion. Savings Bond Alert readers have access to an online graph showing monthly Savings Bond investments. Check your Book Notes for the link.

I Bonds hit 72.2% of sales in October

Investments in Savings Bonds in October were $531.6 million. This is an annual investment rate of $6.38 billion, essentially unchanged from the 2005 fiscal year rate. However, Series I bonds made up 72.2% of the total October investments, which is the highest share they've had since October 2003, when the I bond share reached 81.7%. Given that EE rates were lowered on November 1 while the composite I bond rate was raised, look for the I bond share to reach its highest level ever during the next six months. Savings Bond Alert readers have access to an online updated monthly sales chart. Check your Book Notes for the link.

Treasury drops I bond fixed rate to 1.0%

The U.S. Treasury slapped small investors with lower Series EE and I Bond rates today, even though interest rates in the open market have risen during the last six months. The Series I Bond fixed base-rate was set at 1.0%, down from the previous 1.2%. The EE bond rate was set at 3.20%, down from the previous 3.50%. Large investors who buy TIPS, the Treasury's marketable security comparable to I Bonds, have seen the 5-year yield rise in the last six months to 1.81% from 1.28%, an increase of 53 basis points. By dropping the I bond fixed base rate 20 basis points, the Treasury is forcing small investors to take a rate 0.73% less, in comparison to large investors, than what it offered six months ago. Large investors who buy 10-year Treasury Notes, which the Treasury "uses" to set the EE bond rate, have seen their yields rise in the last six months to 4.57% from 4.21%, an increase of 36 basis points. By dropping the EE bond rate 30 basis points, the Treasury is forcing small investors to take a rate 0.66% less, in comparison to large investors, than what it offered six months ago. Because of the jump in inflation during the last six months, the initial interest rate for Series I Savings Bonds purchased during the next six months will be 6.73%, up from the previous 4.80% rate. The new Series I rate is made up of the 1.0% fixed base rate and a 5.70% inflation component. The inflation component applies to all Series I Savings Bonds and is up from the previous level of 3.58%. Older Series I bonds will earn from 6.73% to 9.39%, depending on issue date, during their next six-month rate period. Older Series EE Savings Bonds issued between May 1997 and April 2005 will earn 3.61% during their next six-month rate period, up from the previous 3.42%. Rules for these bonds force the Treasury to set the rate at 90% of the 5-year Treasury Bill rate, which has also risen during the last six months. Series EE bonds issued prior to May 1997 pay a variety of rates. Also this month, the final issue of Series E bond that paid interest for 40 years reached final maturity and stopped paying interest. All Series E bonds issued before December 1975 are now stinker bonds and should be redeemed.

Fiscal Year 2005 Savings Bond sales down 12.5%

Savings Bond investments in Fiscal Year 2005 (Oct 2004-Sep 2005) were $6,306 million, down 12.5% from the previous fiscal year and the lowest fiscal year total since four years ago in FY-2000. For the year, Series I Bonds accounted for 59.7% of the investment and Series EE bonds the remainder. The I Bond share was up slightly from last year's 58.3%, but well below the share of the previous two years, which peaked in FY-2003 at 67.6%. Savings Bond Alert readers can see an online updated monthly sales chart at Book Note 2-1.

Inflation jumps; new I bonds could exceed 7%

The initial six-month rate for Series I Savings Bonds could exceed 7% after November 1. The inflation component of the I bond rate will be 5.69% for rate periods beginning from November to April. This represents the annualized change in the Consumer Price Index between March and September, which was announced this morning. Using the current I bond fixed base rate of 1.2% creates a composite I bond rate of 6.92%. If theTreasury increases the base rate for new I bonds to 1.3% or more, the rate on new I bonds will exceed 7%. Older I bonds will pay from 6.72% to 9.39% during their next six-month rate period. I bonds issued from May 2004 through April 2005 have the lowest base rate - 1.0% - and will earn the 6.72% rate. I bonds issued from May through October 2000 have the highest base rate - 3.6% - and will earn the 9.39% rate. Even after the early withdrawal penalty, I bonds purchased before the end of this month will earn a guaranteed one-year APY (yield after compounding) of 4.13%. This is a combination of six months at the current composite rate of 4.80% plus three months at 6.92% (the other three months of interest are lost to the penalty). This is well above the best current 1-year CD rates.

Next I bond rate could exceed 5%

For the current six-month I bond rate-setting period, inflation is running at 3.85%, as compared to the 3.58% rate of the last rate-setting period, according to today's Consumer Price Index announcement. If this rate continues in the final month of the rate setting period, the I bond rate announced on November 1 will be over 5%, as compared to the current 4.80%. I'll publish more exact numbers here in mid-October. Meanwhile, total investments in Savings Bonds continue to be heavily weighted towards I bonds - 63% in August - but dwindling on a year-over-year basis. Total sales this fiscal year are on track to be the lowest in three and perhaps four years. Savings Bond Alert readers can see an online updated monthly sales chart at Book Note 2-1.

Series I at 67% of sales;inflation at 3.26% through July

The Treasury reported this week that Series I Savings Bond investments in July totalled $297.1 million, about 67% of the month's total Savings Bond investments of $444.8 million. Series EE accounted for the rest of the sales, at about $147.6 million. And the Bureau of Labor Statistics has announced that inflation for the period from March through July ran at an annual rate of 3.26%, down slightly from the 3.58% September 04-March 05 rate. I bonds earn a combination of a fixed rate set when the bond is issued and the current inflation rate. For the first six months, I bonds purchased today pay 4.80%, based on a 1.2% fixed rate and the 3.58% Sep-Mar inflation rate. For the October to September fiscal year, the projection for total Savings Bond investments is currently below the previous year and significantly below the two years before that. These four years, however, are all higher than earlier years going back to when I bonds were introduced in 1999. Savings Bond Alert readers can see an online updated monthly sales chart at Book Note 2-1.

June sales - 69% Series I bonds

Series I Savings Bond investments in June totalled $386.8 million, about 69% of the month's total Savings Bond investments of $559.2 million. Series EE accounted for the rest of the sales, at about $172.3 million. For the October to September fiscal year, the projection for total Savings Bond investments is currently slightly below the previous year and significantly below the two years before that. These four years, however, are all higher than earlier years going back to when I bonds were introduced in 1999. Savings Bond Alert readers can see an online updated monthly sales chart at Book Note 2-1.

Series I outsells Series EE by more than 2 to 1 in May

Investors purchased $484.8 million of Series I Savings Bonds in May, compared to $216.3 million of Series EE. The Series I percentage of the total, at over 69%, hasn't been this high since November 2003. It appears that - as we predicted in our last sales report - Series I investors were waiting during April because they expected higher rates after the Treasury's May 1 rate announcement. And they got them. Total Savings Bond sales in May were $701.1 million. The only month this fiscal year (since November) with higher total sales was January. However, so far this fiscal year Savings Bonds have sold at an annual rate of $6.726 billion, which will create the lowest annual rate since 2001 if sales continue at this pace for the rest of the fiscal year. If you have a copy of my book, you can see an online updated monthly sales chart at Book Note 2-1.