May 2012 I Bond Rate Falls to 2.20%
The latest I Bond rate has been announced by the Treasury Department for Series I Savings Bonds, issued from May 2012 through October 2012. The new I Bond rate is 2.20%. This is down from a previous rate of 3.06% in November 2011, and a decrease of 0.86% compared to the previous rate.
There are two components which comprise I Bonds. The first component is a fixed rate, which lasts throughout the life of the I Bond. The second component is a variable rate, which is calculated by using the semiannual inflation rate from the Consumer Price Index for all Urban Consumers (CPI-U). The May 2012 I Bond rate has a fixed rate of 0.00% and a variable rate of 1.10%.
With the current interest rates of banking and savings accounts so low, consumers are looking for a variety of ways to increase the amount that they earn. I Bonds offer a higher rate than most savings accounts offer, but investors need to be aware that I Bonds are not nearly as liquid as other banking options. Investors are not allowed to redeem I Bonds during the first year of ownership. If an I Bond is redeemed within the first five years of purchase, the latest three months worth of interest is levied as a penalty.
I Bonds reset their earning rate on May 1 and November 1 each year. The next rate update will be on November 1, 2012. I Bonds can be purchased in values of $50, $75, $100, $200, $500, $1000, $5000 and $10,000. As of January 2012, paper I Bonds are no longer available for purchase at financial institutions, but still can be purchased online from TreasuryDirect.
Follow Technorati