"U.S. Treasury Reveals New Bond Rates: 3.98% Annual Yield for May-October Purchases"

U.S. Treasury Announces 3.98% Annual Rate for Series I Savings Bonds Effective May 2025 The U.S. Department of the Treasury has announced a 3.98% annual interest rate for new Series I Savings Bonds purchased between May 1 and October 31, 2025, as per a statement by Cryptopolitan on April 9. This rate marks an increase from the previous six-month rate of 3.11%, influenced by a 2.86% inflation-adjustment and a 1.10% fixed rate. Although the fixed rate is slightly down from the 1.20% rate set in October last year, it remains competitive. Semi-Annual Adjustment of Series I Bond Rates The Treasury updates the composite rate for Series I Savings Bonds bi-annually in May and November, combining a fixed rate and a variable inflation-adjusted rate. This composite rate determines the yield that bondholders receive over a six-month period. While the inflation component is adjusted every six months based on price changes, the fixed rate is constant for the bond's life and is locked in at the purchase time. Despite inquiries, the Treasury has not disclosed the precise method for setting the fixed rate. Despite the newly announced 3.98% annual composite rate being considerably lower than the record 9.62% rate during May 2022's inflation spike, the fixed component remains attractive to long-term investors. Buyers can secure the fixed rate at purchase, ensuring stability even as the inflation-linked portion varies. Rate Changes for Existing and New Bondholders The Treasury clarified that the new rate does not immediately apply to existing bondholders due to a six-month holding period adjustment delay. For example, an investor purchasing Series I Bonds in March 2025 would apply the composite rate at purchase for the first six months. Subsequently, the rate updates based on the next composite rate adjustment in May and November. For instance, a bond bought in March 2025 would initially carry a composite rate of a 1.90% variable rate and a 1.20% fixed rate. Six months later, starting in September 2025, the inflation-adjusted component would rise to 2.86%, while the fixed rate remains 1.20%. Together, these adjustments result in a 4.06% new composite rate. Ultimately, the yield depends on the bondholder's purchase date and the prevailing terms. Broader Economic Signals: U.S. GDP and Equity Markets Falter On the same day, the U.S. Department of Commerce reported a 0.3% contraction in GDP for Q1 2025, signifying early economic challenges under President Donald Trump's second term. Peter Navarro, a trade adviser in the Trump administration, told CNBC the GDP contraction depicted "the worst possible scenario" but argued that it overlooked positives. He claimed economic growth would have hit 3% if inventory accumulation and tariff effects were excluded. However, market sentiment was bleaker. Major indexes suffered sharp losses, with the Dow Jones Industrial Average dropping over 1,000 points and the S&P 500 falling 3.46%. Year-to-date losses for the S&P 500 now exceed 7%, highlighting investor concerns amid weak economic data and ongoing uncertainties.