Are U.S. Savings Bonds Still Worth It in 2025? | Cockatoo

With global economic uncertainty and shifting interest rates, U.S. Savings Bonds are back in the spotlight. But do they still offer the safety and returns Australians expect in 2025?

What Are U.S. Savings Bonds, and Why Do Australians Care?

U.S. Savings Bonds are low-risk, government-backed securities issued by the U.S. Treasury. Traditionally, they’re a favourite among American savers, but recent years have seen more Australians consider them—either as part of a diversified global portfolio or for relatives with dual citizenship or U.S. ties. The appeal? Guaranteed returns, federal government backing, and unique tax advantages (for U.S. taxpayers).

• Types: Series EE (fixed rate) and Series I (inflation-indexed)
• Minimum investment: US$25 (digital)
• Purchase limits: Up to US$10,000 per person, per calendar year, per series

For Australians, investing directly in U.S. Savings Bonds isn’t as straightforward as buying local government bonds or term deposits. However, those with U.S. bank accounts or dual citizenship can access them, and some international brokers may facilitate purchases for non-citizens, subject to tax and reporting rules.

2025 Policy Updates: What’s Changed?

The U.S. Treasury has made several key changes for 2025 that impact the appeal of savings bonds:

• Series I Bond Rates: The composite rate for Series I Bonds issued between May and October 2025 is 5.27%, reflecting persistently high U.S. inflation in late 2024. This is down from the 2022-23 peak (over 9%), but still outpaces many savings accounts and term deposits worldwide.
• Series EE Bond Rates: Newly issued Series EE Bonds continue with a fixed rate (currently 2.7%), but double in value after 20 years if held to maturity—a unique guarantee in today’s market.
• Redemption Rules: Bonds must be held for at least 12 months. Redeeming before five years forfeits the last three months’ interest. These rules remain unchanged.
• Digital-Only Issuance: All new bonds are issued electronically via TreasuryDirect.gov, streamlining access but posing hurdles for non-U.S. residents.

For Australians, the main attraction is the inflation protection and U.S. dollar exposure. With the AUD/USD exchange rate hovering around $0.66 in early 2025, U.S. Savings Bonds may also offer a currency diversification hedge.

How Do Savings Bonds Stack Up Against Other Safe Investments?

Let’s compare U.S. Savings Bonds to popular Australian options and global safe havens:

• Australian Government Bonds: 10-year yields are around 4.1% in May 2025, with lower inflation protection than Series I Bonds.
• Term Deposits: Major Australian banks are offering 3.9–4.4% for 12-month terms in 2025, but with no inflation adjustment and AUD exposure.
• High-Interest Savings Accounts: Rates have plateaued near 4% p.a., with bonus conditions and limited guarantees beyond $250,000 (under the Financial Claims Scheme).
• Global Inflation-Linked Bonds: Options exist via managed funds or ETFs, but direct access to U.S. I Bonds’ unique structure isn’t widely available outside the U.S.

Example: An Australian with a U.S. TreasuryDirect account who invested US$10,000 in I Bonds in May 2023 (at 4.3%) saw the rate reset in May 2024 to 5.27%. Despite AUD/USD fluctuations, the real (inflation-adjusted) return outpaced most domestic options.

Risks, Tax, and Access: What Australians Need to Know

While U.S. Savings Bonds are low-risk, they aren’t risk-free for Australians:

• Currency Risk: Returns are in U.S. dollars; AUD depreciation boosts returns, while appreciation erodes them.
• Access Barriers: Direct purchase requires a U.S. Social Security Number, U.S. address, and U.S. bank account. Some expats and dual citizens qualify, but not all Australians can participate directly.
• Tax Implications: Interest is tax-deferred for U.S. federal taxes until redemption. Australian residents must declare global income, so interest from U.S. Savings Bonds is taxable in Australia, even if not yet redeemed. Double-taxation treaty benefits may apply, but professional advice is recommended.

For most Australians, exposure to U.S. government securities is more practical via global bond ETFs or managed funds, which offer liquidity and simplified tax reporting.

Conclusion: Still a Safe Haven—But with Caveats

U.S. Savings Bonds, especially Series I Bonds, remain a safe and attractive option for those eligible to buy them—offering inflation protection and U.S. dollar diversification. However, for most Australians, direct access is limited, and tax complexities abound. Comparing all your fixed-income options, including local government bonds and term deposits, is crucial in 2025’s ever-evolving financial landscape.