How are Savings Bond Rates Determined?

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  • Written By: Ken Black
  • Edited By: Andrew Jones
  • Last Modified Date: 23 August 2019
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The determination of the savings bond rates is largely dependent on the percentage of the fixed rate and the inflation rate. Other than releasing these rates periodically, most governments do not reveal what goes into determining the rates, especially the fixed rate. To keep the savings bond rates somewhat competitive with other savings products, it is possible that factors such as the prime interest rate and other policies of a country's central bank have a large influence.

In the United States, the fixed rate is issued each May and November and serves as a base rate for the savings bonds throughout its entire life. This rate generally ranges from 0 percent to 5 percent. A savings bond rate that has a fixed rate of zero does not mean that no interest will be offered. That will ultimately depend on the other major rate, known as the inflation rate.

While the fixed savings bond rates are known when a person buys the bonds, an explanation as to what goes into the rates is not normally offered. That being said, many analysts may be willing to offer a prediction on what new fixed savings bond rates will be. That analysis may be based on what the analyst feels is a good formula to use based on past history. Nothing is guaranteed, however, and it may not be in the best interest of the investor to wait.


Of everything that goes into savings bond rates, the inflation rate could be the biggest unknown factor when buying savings bonds. The inflation rate is based on the consumer price index, and is also issued every six months, during the months of May and November. Once combined with the fixed rate, the total rate provides the earnings for the bonds over a six-month period. Inflation rates can go from less than half a percent on up, but generally stay less than 3 or 4 percent every six months.

In rare circumstances, there could be a time when the savings bond rate is actually a negative percentage, and thus the bond could be worth less than when it was bought. This could happen if the fixed rate remained at zero and the inflation rate was a negative number, as one example. The only time this could happen is when there is a period of deflation. Deflation in the United States has not happened since the Great Depression, but some countries did start to experience deflation in the first decade of the 21st century.


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