New I-Bonds Go On Sale Today

FOR IMMEDIATE RELEASE

September 1, 1998

Treasury's new inflation-indexed I-Bonds go on sale today at banks and other financial institutions. I-Bonds are designed to offer all Americans a way to save that protects the purchasing power of their investment while assuring them a real rate of return over and above inflation. The fixed rate for I-Bonds purchased in September and October 1998 is 3.40 percent, and the Earnings Rate is 4.66 percent.

I-Bonds have features that make them attractive to many investors. They are sold at face value in denominations of $50, $75, $100, $500, $1,000, and $5,000 and earn interest for as long as 30 years. Two new denominations, $200 and $10,000, will go on sale in May 1999. I-Bond earnings are added every month and interest is compounded semi-annually. They are free from State and local income taxes, and Federal income tax on I-Bond earnings can be deferred until the bonds are cashed or they stop earning interest after 30 years. Investors cashing I-Bonds before five years are subject to a 3-month earnings penalty.

FIRST I-BOND EARNINGS RATE: 4.66%

The Earnings Rate for I-Bonds is a combination of a fixed rate, which will apply for the life of the bond, and the inflation rate. The 4.66 percent Earnings Rate for I-Bonds bought in September and October 1998 will apply for the first six months after their issue. The Earnings Rate combines the 3.40 percent fixed rate of return with the 1.24 percent annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The CPI-U increased from 161.2 to 162.2 from September 1997 to March 1998, a six-month increase of 0.62 percent.

Fixed and Earnings Rates for I-Bonds are announced each May 1 and November 1.