Series I Bonds
The Treasury issues series I bonds in both paper and electronic forms. Paper bonds are purchased for the denomination value and the available denominations are $50, $75, $100, $200, $500, $1,000 and $5,000. Electronic series I bonds can be purchased in any amount from $25 to $5,000. The annual purchase limit is again $5,000 of paper and $5,000 for electronic series I bonds.
Series I bonds have a two tier interest rate system. The bonds are issued with a fixed rate for the life of a bond in the same manner as with series EE bonds. In addition, the Treasury declares an interest rate factor every six months, which will increase or decrease the rate series I bonds are earning. The fixed rate for new bonds and the inflation factor for all series I bonds are declared each May 1 and November 1. The inflation rate factor is compiled from the Consumer Price Index -- CPI.
The current rate for a series I bond is calculated by adding the fixed rate plus two times the semi-annual inflation rate. Currently, new series I bonds have a fixed rate of zero percent and the inflation factor in effect through October 31 is 2.6 percent. An I bond purchased now will earn interest at an annual rate of 4.6 percent until the end of October. If you had purchased an I bond in 2001 when the fixed rates on new bonds was three percent, your bond would be earning 7.6 percent for the current six month period.
The inflation rate factor can go negative if there is deflation instead of inflation. It is possible for the earnings on a series I bond to go to zero if the inflation factor is negative more than the fixed rate of a bond. In the 13 years I bonds have been available, the inflation factor was negative for one semi-annual period.
Regardless of the type of bond one may choose to purchase or redeem, as an investment vehicle, they are growing in acceptance and popularity. In uncertain economic times, they are proving to be a reliable tool for financial security.