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rockyj · 08-23-2007, 06:43 PM

We have EE savings bonds that were acquired at different times over the years. We use the savings bond wizard program from treasury direct to keep the inventory. I am confused by the rates and yields it reports, as they seem like they must be computed differently from how similar terms are computed for CDs. For example, we have bonds, purchased at different times, all showing rates of 4%, but showing various yields for various lots (e.g. yields of 5.3, 5.37, 5.45, 5.55 and 5.6). We have one group that shows a rate of 4.15 but a yield of 4.13. So clearly something different is happening here than just the results of compounding of the interest rate to get the yield as with the rate/yield quotes on CDs. Can someone explain or point me to a source to clarify? Thanks for any help you can offer.

twaddle · 08-23-2007, 07:24 PM

Here's what the help gives you in the program:

Rate: short for current interest rate; the annual rate your bond is earning during the Pricing Date; this rate is used to calculate the interest that accumulates on the Next Interest Date; if a rate is marked N/A, it means it isn't available because the bond doesn't have a rate yet (it'll be released with the next values update)
Yield: short for yield-to-date; it's the annualized percent change in your bond's cash value from its issue date to the date it most recently increased in value; it tells you how your bond has performed since you've bought it; you might think of it as the average interest rate your bond has earned to date; for Series I, EE, E Bonds and Savings Notes only; the Wizard doesn't calculate the yield for Series HH or H Bonds

EE bonds differ from CDs in that the interest rate is variable (at least with some issues), so the rate is the next rate used to determine your coupon payment, while the yield takes your past coupon payments and calculates the yield on your original investment.