Savings Bond Interest Rate Jumps to 7.35%

U.S. savings bonds will earn interest at a rate of 7.35% during the next six months, the highest return since early 1986, the Treasury Department said Tuesday.

The department said the new rate, which takes effect immediately, is up from a rate of 6.90% earned in the past six months. It is the highest rate since savings bonds earned 8.36% from November, 1985, through May, 1986.

Interest on savings bonds is adjusted on May 1 and Nov. 1 to reflect open market interest rates. The rate is based on 85% of the yield on five-year Treasury securities, which have averaged 8.65% over the past six months.

Since the government switched to market rates for savings bonds in November, 1982, the rate of return has averaged 8.32%. Investors who hold their bonds for at least five years earn the average of the half-year rates.

In addition, investors are guaranteed a minimum interest rate, regardless of what the market rates do. That minimum, guaranteed rate is 6%. But for bonds purchased before Nov. 1, 1986, the minimum is 7.5%.