1.1) I've heard about the new savings bond rate structure. Does this mean that Treasury is issuing a new series of savings bonds?

No. Treasury is making the familiar Series EE savings bond a more attractive way to save by moving to a higher rate and by increasing bond values every month instead of semiannually.

1.2) Why did Treasury change the way Series EE bonds earn interest?

This is the latest in a series of changes to Series EE bonds that will make them a more attractive way for Americans to save for the future.

2.1) When do the new rates for savings bonds take effect?

The new way of setting rates for Series EE savings bonds takes effect for bonds issued on or after May 1, 1997.

Savings bonds will earn the new higher rates right from the start. The rate is 90 percent of the average 5-year Treasury market yields for the preceding six months. Treasury will announce a savings bond rate each May 1 and November 1. The rates announced each May and November are the annual rates that apply to bonds for that six month earning period. For example, the six month earning period for a bond issued in May is from May through October; for a bond issued in June, it's June through November. The rate that's announced is the rate bonds will earn during the 6-month earning period.

3.2) How is interest added to savings bonds after May 1, 1997?

New EE bonds will increase in value every month. The rate that Treasury announces each May and November will be applied to a bond for the 6-month earning period.

3.3) How long do I have to hold my bonds to get the new rates?

Savings bonds can be cashed in any time after 6 months. If you redeem a bond before 5 years, there is a 3-month interest penalty. See question 3.4 for more information.

3.4) If I cash a bond during the first five years, how is the penalty figured?

If you cash a bond before it is five years old, you give up the last three months worth of interest. For example, if you buy a bond in May 1997 and cash it 24 months later in May 1999, you get your original investment back plus 21 months of interest. The value of the bond would be based on the announced rates applied over the 21 month period from May 1997 through February 1999.

3.5) Will I get compound interest?

Yes. The Series EE bond interest rate is compounded semiannually.

3.6) How long will my bonds earn interest?

Series EE bonds will earn interest for 30 years. At the 30 year mark, they reach final maturity and stop earning interest.

3.7) Can I be sure my bond will reach face value?

Yes. Series EE bonds are purchased at half their face value or denomination. Because EE bond interest is pegged to market rates that change every six months, there is no way to predict when a bond will reach its face value. For example, a bond earning an average of 5% would reach face value in 14½ years while a bond earning an average of 6% would reach face value in 12 years. In the unlikely event that rates are so low that a bond doesn't reach face value by the time it is 17 years old, Treasury will make a one-time adjustment to increase the bond's value to face value at that time.

Nothing. Outstanding Series EE and E bonds as well as savings notes issued before May 1, 1997, are not affected by these changes. They will continue to earn interest under the terms in effect before May 1, 2026.

4.2) Are there any changes to Series HH or H bonds?

No. Series HH bonds remain unchanged. Series HH/H bonds issued or entering an extended maturity period on or after March 1993 will pay interest at a level rate of 4%.