Savings Bonds Are Back

Interest rates on Uncle Sam's debt have been in the tank for the past six months, with bonds earning minimal interest, but the Treasury Department has recently increased those rates, making savings bonds a more attractive investment.

Looking for a gift for a son, daughter, niece or nephew? Savings bonds have long been a favorite holiday gift for the younger set and now there’s even more reason to stuff a stocking with bonds. Interest rates on Uncle Sam’s debt have been in the tank for the past six months, with bonds earning minimal interest, but the Treasury Department has recently increased those rates, making savings bonds a more attractive investment.

EE bonds bought between May 1 and November 1 of this year are yielding 0.70% and there’s no chance of those rates increasing over the life of the bond. The new rate on EE bonds bought between November 1 and April 30 of next year is 1.20%. With I bonds, which have interest rates indexed to inflation, the base rate remains the same for the life of the bond, but the variable rate can rise or fall with the CPI index. The rate on I Bonds was effectively 0% for the past six months, a combination of a 0.10% base rate and a -5.56% inflation rate. I bonds will now be paying 3.36% -- a 0.30% fixed rate added to a 3.30% variable rate.

If you want an actual paper bond to give as a gift, you’ll have to go to a bank that’s set up to handle savings bond purchases. Both EE Bonds and I Bonds are sold at face value and the minimum face value for a paper bond is $50. You can also set up an account at TreasuryDirect to buy bonds online. There are a couple of twists to online gift purchases, however. The recipient must have his/her own TreasuryDirect account or one linked to that of a parent or guardian, and you’ll need to know the recipient’s Social Security number.