No. of Recommendations: 0
These are links to information pages:

I-Bonds: http://www.publicdebt.treas.gov/sav/sbiinvst.htm

EE-Bonds: http://www.publicdebt.treas.gov/sav/savinvst.htm

1)What, specifically, does "Market-Based Rate" mean?

For EE-Bonds issued in May 1997 and later, the yield on EE-Bonds is based on 90% of the average yield of 5-year Treasury Notes for the 6-month period preceeding the announcement date (first day of May and first day of November). Whatever the most recently announced rate, a newly issued EE-Bond will yield that rate for six months. At every six months from month of issue, the rate will change to the rate of the most recent announced yield.

There is also a 3-month interest penalty if the EE-Bond is redeemed within 5 years of month of issue. They cannot be redeemed within 1 year of month of issue unless the Bureau of Public Debt declares your area a disaster area.

See http://www.publicdebt.treas.gov/sav/sav597ee.htm for how interest is calculated on EE-Bonds issued in May 1997 or later.

The "Market-Based Rate" is thus referring to the average market returns of the 5-year treasury bonds, which are set by auction and by trade between auctions.

2)Will the bonds I purchased maintain the same interest rate throughout their interest bearing period (30 years) or does it change according to current market conditions?

No. The yield will be fixed for 6 months. Then at each 6-month interval it will change to the most recently announced yield for EE-Bonds. So the rate of EE-Bonds issued in May will change every November and May, the rate of EE-Bonds issued in June will change every December and June, etc.

Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement