Rates Hikes – Series EE and Series I

The Fed really wants your money
By Kevin on November 5th, 2022

Jerome Powell, Chair of the Federal Reserve
Jerome Powell, Chair of the Federal Reserve

We have some bad news, but mostly good news.

Midterm elections are just around the corner, and the Federal Reserve is in the spotlight.

The central bank is facing criticism from both parties for its handling of the economy, and its policies are sure to be a decisive issue in the campaigns.

Some Democrats are attacking the Fed for its role in the current financial slowdown, while Republicans are faulting the central bank for its easy money policies of the past few years.

With inflation remaining elevated, the Fed is in a tough spot. If it continues raising interest rates quickly, a “soft landing” may not be possible.

But if it keeps rates low, it could do little to quell inflation, which is a top priority for voters this year.

The Fed is like a parent who is trying to get their kids to eat their vegetables. They know the kids don’t want to, but they’re going to do it anyway. Either way, it’s going to be a tight race to the finish.

Fortunately, you can make money no matter which route the Fed continues to take. The Treasury Department has hiked fixed rates on both its Series EE and Series I bonds, ensuring they are excellent places to park your money for the near future.

More specifically, the new fixed rate on Series I bonds is now 0.40% from a previous low of 0.00% and the new fixed rate on Series EE bonds is now 2.10% up from a previous low of .10%.

Series I bonds are now yielding 6.89% in their combined rate. And these will keep up with inflation if it continues to rise, so it acts as a hedge against sustained high inflation rates. Because of these great returns, I personally am maxing out the digital $10,000 limit that TreasuryDirect® has on these.

Series EE bonds are now yielding 2.10%, but remember they have a unique property:

They also have this weird mechanic that if you hold to 20 years, their value doubles.
    — https://treasuryviewer.com/2022/06/04/calculating-eebonds.html

So any fixed rate below 3.526% doesn’t help until Year 20 to Year 30. Due to this mechanic, Series EE bonds may not look as appealing as they might seem.