BreadWithSpam[at]fractious.net wrote:
- quote -

Thanks, however, the page appears to refer to bonds purchased
before May 1995.

I was interested in the various terms for EE bonds purchased
May 1997 and later. I was trying to understand the
following web page

http://www.publicdebt.treas.gov/sav/sbfaqmat.htm

In particular under 1.2 the following statement:

"Bonds issued after April 1995 have no guaranteed minimum yield. They
will earn interest in accordance with the terms and conditions in effect
at the time they enter the extension."

Also, this is the listing of Original Terms from this same web page.
Issue Date Original Term
1/80 - 10/80 11 years
11/80 - 4/81 9 years
5/81 - 10/82 8 years
11/82 - 10/86 10 years
11/86 - 2/93 12 years
3/93 - 4/95 18 years
5/95 - 5/03 17 years
6/03 - present 20 years

And under 1.5
"EE bonds issued on or after May 1995 do not have a guaranteed rate
of return. EE bonds issued May 1997 or later earn interest based on 90%
of the average yields on 5-year Treasury securities for the preceding
six months."

So, if 1.2 says the May 1997+ EE bond "earns interest in accordance
with the terms and conditions in effect at the time they enter the
extension" that sounded like when the 17 or 20 year Original Term
is reached, that the government could set some new basis for
determining interest for the remaining 13 or 10 year Extension
Term. And that the new basis would not necessarily have to be 90%
of the 5 year Treasury rate.

I had assumed that 90% of the 5 year Treasury rate would be the
interest basis for the life of these EE bonds, i.e. 30 years. When
I read this web page, I was no longer sure what would happen to
the EE bond rate during the Extension Term.

Thanks for any insight.

Sam

Sam <Sam[at]nospammindspring.com> writes:

- quote -

No.

In all cases for EE bonds, according to
<http://www.publicdebt.treas.gov/sav/savoldee.htmwhat happens is that after the original maturity period,
the *guaranteed minimum rate* changes to the minimum
in effect at that time for all new issues.

It's not "whatever rates".

It's the same calculation that it was before
(ie. 85% of the 5-yr treasury) *or* the guaranteed
minimum, whichever is higher. And the guaranteed minimum
gets reset.

Go back and re-read that web page.

--
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I've been trying to understand all the EE bond rules/restrictions,
particularly for bonds purchased May 1997 and later. Can anyone
tell me if anything I state below is wrong or expand on it?

And can tax be deferred for 30 years on these bonds purchased May
1997 and later and is it true that the interest rate after
Original Maturity could be on whatever terms the government sets
at that time, there is no guaranteed rate and the rate basis could
be very different from that prior to Original Maturity?

For Bonds bought 5/97 to 5/03
Annual purchase limit: $15,000 (i.e. $30,000 face)
Original Maturity: 17 years (4.17% interest, bond doubles in 17 years)
Interest Rate prior to Original Maturity: 90% of 5 year Treasury Notes
Rate is reset semiannually
Extended Maturity: 13 years
Interest during Extended Maturity: Whatever terms/rates are set during
Extended Maturity, not necessarily
90% of 5 year T Note rate
Tax: Federal Income Tax paid when bond is redeemed or after 30 years
when the bond stops earning interest, if earlier.


For Bonds bought 6/03 to 5/05
Annual purchase limit: $30,000 (i.e. $60,000 face)
Original Maturity: 20 years (3.53% interest, bond doubles in 20 years)
Interest Rate prior to Original Maturity: 90% of 5 year Treasury Notes
Rate is reset semiannually
Extended Maturity: 10 years
Interest during Extended Maturity: Whatever terms/rates are set during
Extended Maturity, not necessarily
90% of 5 year T Note rate
Tax: Federal Income Tax paid when bond is redeemed or after 30 years
when the bond stops earning interest, if earlier.


For Bonds bought 6/05 +
Annual purchase limit: $30,000 (i.e. $60,000 face)
Original Maturity: 20 years (3.53% interest bond doubles in 20 years)
Interest Rate prior to Original Maturity: rate in effect at date of
purchase, based on 10 year
Treasury Note rate adjusted
for EE Bonds. Rate remains
the same prior to Original
Maturity.
Extended Maturity: 10 years
Interest during Extended Maturity: Whatever terms/rates are set during
Extended Maturity, not necessarily
based on 10 year T Note rate
Tax: Federal Income Tax paid when bond is redeemed or after 30 years
when the bond stops earning interest, if earlier.