Savings Bond Treasury

The Savings Bond Treasury includes two main types of Savings Bonds: Series Inflation Indexed (or I Bond) and Series EE Savings Bond. The I Bond offers Americans a way of both saving and protecting their investment by the assurance of a real rate of return over and above inflation. The I Bond will carry a fixed base rate as well as a semi-annual calculation which is based on the inflation rate as measured by the Consumer Price Index. This calculation protects the investor's savings in case of inflation.

Sold at face value in denominations of $50, $75, $100, $200, $500, $1,000, $5,000 and $10,000, these I Bonds earn interest for as long as 30 years. Every month the I Bond earnings are added and interest is compounded semiannually. Additionally, Savings Bonds are exempt from state and local income taxes. However, I Bond earnings are not exempt from federal income taxation, yet the federal income tax can be deferred until the bonds are cashed or the bonds stop earning interest after thirty years. If an investor cashes any I bond before five years, it is subject to a three month earnings penalty.

The Series EE Savings Bond pays interest that is equal to 90 percent of the average five year Treasury securities yield for the preceding six months. EE Bond rates are based on the rates which are set by those who participate in the large government bond trading market. The EE Bond had replaced the original E Bond which had been mostly associated with World War II war bonds. On May 1, 1941, President Franklin D. Roosevelt bought the very first Series E Bond which was sold by Secretary of the Treasury Henry Morgenthau. Prior to this, Liberty Bonds were sold to help support WWI.

On December 11, 2001, The Department of the Treasury announced the new Series EE Patriot Bond three months after the September 11, 2001 terrorist attacks on the United States. The funds from these bonds will help to support the federal government's war against global terrorism. The EE Bonds which are sold through financial institutions and through the Bureau of Public Debt's Savings Bond Direct website will be inscribed with the words, "Patriot Bond." Those who can buy and own both types of Savings Bonds must have a Social Security Number and be a U.S. resident, U.S. citizen (if living abroad) with a U.S. address of record, and a civilian employee (regardless of residence) of the United States. The Savings Bond Treasury offers all Americans an incentive to save and a way of supporting the United States, as well.