Should You Invest In the Government’s Latest Bond Offering, One Of Its Highest Rates Ever?
The US government's Series I government bonds will pay 6.89% annual interest and makes for a safe investment even if there are some drawbacks.
This article is more than 2 years old
The American government released a statement this week announcing that Series I government bonds will pay 6.89% annual interest. In the global climate, we are in, the interest rate from these bonds are high, making them profitable to consumers.
While this interest rate is down from 9.62% in May, it is still a lucrative deal for consumers. This rate of 6.89% is the third-highest rate since these government bonds were founded nearly twenty-five years ago. Consumers and investors can avail of this rate of interest until April 2023.
It is a competitive rate compared to other investment options in today’s economic climate. Investors can obtain these I government bonds through Treasury Direct. There are several stipulations to these bonds, including that the amount invested can be $10,000 or less per calendar year. If a larger sum can be invested, the federal tax refund can also be used to acquire up to $5,000 in paper I government bonds.
Treasury Direct, the financial institution where you purchase these government bonds, crashed on October 28. This was the last day the I bonds were at a high-interest rate of 9.62%. Despite the website crashing, it sold over $979 million in bonds in one day, nearly as much as it sold over a three-year period.
I bonds are a relatively safe way of investing small to medium amounts of money. It earns monthly interest in two separate ways; both a fixed rate and a variable rate. The fixed rate of interest changes every six months, and the variable rate also changes every six months, but that rate is based on inflation and the consumer price index.
The US Department of Treasury does not give any information on how it decides on the fixed rate of interest, but economists think it takes into account the demand for the product and the yield it will receive from it.
Both interest rates change every six months, so if you bought government bonds on January 1, your interest rates would reset every June 1 and January 1.
While the interest rates of these bonds sound like an excellent investment, one should always research every aspect of an investment before committing money to it. One point to mention is that any money invested into the I government bonds cannot be touched for at least one year, and there is a penalty of three months of accrued interest if the bond is cashed in within the first five years.
Another potential negative point is that the variable interest rate is reducing, and economists state that it will continue to do so, making this investment less lucrative in the future.
Investment bankers state that younger consumers wanting to build up an investment portfolio should look at the stock market as a way to invest their expendable capital rather than bonds.
It is a crazy economic time for everyone, and it is hard to know which investment path to choose without being an expert, as neither the interest rates nor the stock market is very stable at the moment. The I government bonds with an interest rate that high look like a stable long-term investment as you cannot lose money compared to the stock market, but who knows what the future holds in today’s market?
