U.S. to Introduce Inflation-Indexed Savings Bonds

The U.S. Treasury plans to introduce new savings bonds with inflation protection.

Vice President Al Gore and Treasury Secretary Robert Rubin will announce the new class of savings bonds at a Treasury ceremony today in Washington.

Savings bonds are sold in small denominations at banks and through company-sponsored payroll savings plans. The bonds earn a set rate of interest, which is adjusted every six months to market conditions.

The new inflation-indexed savings bonds are expected to provide a guaranteed rate of return over the U.S. consumer inflation rate.

Because inflation is the main enemy of bond owners--by eroding the value of their fixed returns over time--indexing returns can provide bond holders with the peace of mind that they can’t fall behind inflation.

The Treasury declined to provide details on the mechanics of the bonds, which will be called I-Bonds. But they will honor “eight prominent Americans,” the Treasury said, suggesting there will be eight individual denominations available.

The Treasury has for several years issued inflation-indexed five- and 10-year notes and 30-year bonds, but inflation protection would be a first for savings bonds.