May 1 (Bloomberg) -- Widows and orphans may be facing more bad news.
Financial market turmoil has caused the fixed rate on the newest issue of Series I inflation-indexed savings bonds to fall to zero for the first time, according to the U.S. Treasury's Bureau of Public Debt. Investors still get a return on the investment as long as consumer prices rise, because the government pays additional interest in lockstep with inflation.
The fixed rate's decline to zero reflects the decline in returns in money markets in the aftermath of the credit collapse, said Kim Treat, a spokesman for the bureau in Washington. The government promotes the savings bonds as ``low- risk'' investments for individuals that protects them against inflation.
The so-called earnings rate on the bonds issued between May and October, which is tied to the rate of inflation, is 4.84 percent, the bureau said in a press release. The fixed rate, on top of the compensation for rising consumer prices, is officially 0.00 percent, down from 1.2 percent when the Series I was last issued, in November.
That means investors get no returns on their investments other than compensation for inflation. The fixed rate has never fallen so low since inflation-indexed savings bonds were introduced in the 1990s, Treat said.
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