Rates on savings bonds wilt with low inflation

Sorry, savers of a certain age, but the rates on some of your savings bonds just went down again.

For the Series I Savings Bond, the rate will be 0.74 percent on bonds bought between Monday and April 30, 2011, the federal Bureau of the Public Debt announced Monday.

That includes a fixed rate of 0 percent, which applies for the 30-year interest-bearing life of the bond, and an inflation-adjusted rate of 0.74 percent. That variable rate changes every May 1 and Nov. 1.

At least the calendar period used by the Treasury Department actually found some inflation this time. If the United States were to enter a period of deflation, that savings bond would wind up paying zero.

Fortunately, the earnings rate on Series I savings bonds can never be less than zero. The same is not true for Treasury inflation-protected securities. A sale of TIPS last week produced a yield of negative 0.55 percent. It was the first negative rate for a U.S. debt issuance.

As for savings bonds, this marks the second time the fixed-rate portion of I-bonds will be zero. The last bonds to have a guaranteed zero rate were issued between May 1, 2008, and Oct. 31, 2008. Of course, in those “good old days,” the variable rate was 2.42 percent.

How does the Treasury Department set that rate? For I-bonds, the annualized rate of inflation is determined by using the Consumer Price Index for all Urban Consumers, which is published by the Bureau of Labor Statistics.

That index increased 0.37 percent, from 217.631 in March to 218.439 in September. (To annualize it, just multiply by 2.)

At 0.74 percent, savers aren’t going to rush to buy these things. The I-bond was paying 1.74 percent between May 1 and Oct. 31, when the inflation-adjusted rate was 1.54 percent.

Savers haven’t been enamored of Series I bonds. They bought just $61 million worth in September, up from an even more puny $52 million in September 2009. Annual sales will likely finish 2010 below $2 billion for the fourth straight year.

The Series EE savings bonds haven’t fared much better. Individuals spent $80 million on them in September, down from $88 million the year before.

The Bureau of Public Debt said a Series EE bond bought between Monday and April 30, 2011, would carry a fixed rate of 0.60 percent. That’s down from the 1.40 percent for bonds bought from May through October.

What’s a saver to do? Good question, for which there are few answers when the average yield nationwide on a 1-year certificate of deposit on Monday was 1.09 percent, down from 1.13 percent last week, according to Bankrate.com.

Small wonder that instead of buying CDs or bonds issued by the federal government, many individuals are choosing to pay down their higher-interest-rate household debt.

The Federal Reserve’s most recent flow-of-funds report shows that household debt has declined for nine straight quarters.

What’s available

Wayne-based SunGard Data Systems Inc. said Monday that it might spin off its Availability Services business unit.

“Availability services” is the current name for computer disaster-recovery services, SunGard’s original business, founded in 1975 as a small unit of what was then Sun Oil Co.

According to a filing with the Securities and Exchange Commission, SunGard said its Availability Services unit had revenue of $1.49 billion for the 12 months ended Sept. 30.

The company has evolved into a provider of financial software, which accounted for 56 percent of its $5.51 billion in 2009 revenue.

SunGard made the disclosure in connection with a debt offering of $500 million of senior unsecured notes.

SunGard said it could spin off the Availability Services unit to its current private-equity holders.