Recently, the U.S Treasury announced the drop of the yield hike of the I Series Savings Bonds for investors from 9.62% to 6.89% leading to a massive rush and the crashing of the Treasury Direct. Now, the question is, what are these bonds, and how do they impact the savings of the investors?
Kavan Choksi Singapore- a business and finance expert, explains
Kavan Choksi Singapore is a widely respected investor and business and finance expert who has invaluable knowledge of finance and economics. He is an ardent freelance photographer and widely traveled. He loves to visit the local shrines and temples there and take photographs. His photography portfolio also includes events, brand building, and portraits.
Traits of these bonds
He states that the Series I savings bonds for investors in the USA are non-marketable in nature, and they fall under the U.S. Treasury program of savings bonds that have been created for offering citizens of the USA investments that are lower if risks than the other asset classes available in the market.
The bond’s non-marketable advantage also implies that it cannot be purchased or sold at any time before maturity in the secondary market in the country. He adds that there are two kinds of interest rates the Series I bond offers to the investor, and they can earn a fixed rate for the lifetime of this bond with a speed of inflation that is adjusted in the months of May and November. This depends upon the changes in the non-seasonal consumer price index that are adapted for consumers in urban areas.
Understanding the fixed rates of interest of the bond
He further says that the fixed-rate interest component that exists in the Series I Savings bond has been and is generally determined by the Secretary of the Treasury in the USA. It is announced in the nation after every six months on the first day of business in the month of May and later on the first day of business in the month of November. It is this fixed rate of interest that is subsequently applied to all the Series I savings bonds that are issued in the market to investors during the following 6months. The rates of interest are compounded semi-annually for the investors and do not change during the lifetime of the bond.
Kavan Choksi Singapore concludes by saying similar to the fixed rate of interest, the rate of inflation is announced by the authorities in the USA twice in the months of May and later November every year. It is determined by the changes that are made to the Consumer Price Index or the CPI that is used for measuring the rates of inflation in the economy of the USA. It is this change in the rates of inflation that is applied to the I-series savings bonds every year. This rate comes into application every six months from the issue date of the bond.
