Highest Level in 3 Years : Interest Rate Boosted on Series EE Savings Bonds

The rate on Series EE savings bonds has been raised to 7.81%, the highest in three years, the Treasury Department announced Monday.

The rate is up from 7.35% and is the highest since 8.36% for the period from November, 1985, through April, 1986. The all-time record is 11.09%, from November, 1982, through April, 1983.

The rate, revised semiannually on May 1 and Nov. 1, is calculated by taking 85% of the average return on five-year Treasury notes over the most recent six months.

To earn the new rate, in effect for six months for any savings bonds purchased between now and Oct. 31, investors must hold the bonds for at least five years. If held less than five years, savings bonds will pay 4.16% to 5.75%, depending on how long they are held. In any case, interest is exempt from state and local taxes, and federal taxes can be deferred until the bonds are redeemed.

Savings bonds can be purchased for a minimum investment of $25 at savings institutions, Federal Reserve Bank branches or through payroll savings plans.

However, perhaps because rates have lagged on certificates of deposit and other savings-oriented investments, sales of the bonds have fallen short of the record postwar sales paces set in fiscal 1986 and 1987, Stephen Meyerhardt, Treasury savings bond division spokesman, said.