Date: Tue, 7 Feb 2006 07:48:42 -0600
From: "Andy" 
Newsgroups: misc.invest.financial-plan
Subject: Re: I Bonds
   posting-account=-qoiUg0AAACUxOSyAd6ZiDQZhUUQV-HI
	iQBVAwUAQ+ilOvl/I4+O31e5AQFrjAH9FzOb0ZSWL9fAEQNKq95wGPDQo/W6bZMp
	j/jOziTZi/kFknJAk8TEHZj3yAltmE7T/9rM1TvM7ZKr1IlmQCSRyQ==
	=O3T2

Anne Brennan wrote:

> In the late 90s I purchased I Bonds, the basic rate was 3% and inflation
> was 3%, giving me a total of 6%.  Those bonds have paid quite well
> since I purchased them especially considering how low interest rates
> have been the last 5 years or so.  I read the basic rate is now 1%.
> What factors made the government change that rate from 3% to 1%?    I
> hope my question is worded clearly.  Thanks for any help.   Anne

I assume its supply and demand; the US Treasury sets the base rate as
low as they think they can get away with and still sell enough bonds.
Since interest rates have been quite low the past few years they have
been able to lower the base rate to 1% and still sell bonds. When long
term interest rates rise again I assume they will raise the base rate
to remain competitive.

Andy