Originally created 07/09/98

Inflation bonds introduced



WASHINGTON -- The eight prominent Americans chosen by the Clinton administration to be honored on new inflation-protected U.S. savings bonds are not your father's founding fathers.

The bonds, introduced in a ceremony Wednesday by Vice President Al Gore and Treasury Secretary Robert Rubin, will feature a diverse group of prominent Americans -- both by ethnic heritage and occupation.

Starting Sept. 1, the Treasury Department will sell savings bonds -- Series I -- indexed to the Consumer Price Index in denominations as small as $50. They will be sold at face value and interest will be tax-deferred until they are cashed.

They'll be offered in addition to, not instead of, the familiar Series EE bonds, which depict such icons of the early Republic as George Washington, John Adams and Thomas Jefferson.

Six denominations will be offered initially under Series I, with Helen Keller on the $50, Mexican-American activist and physician Hector Garcia on the $75, Martin Luther King Jr. on the $100, Secretary of State and Gen. George Marshall on the $500, Albert Einstein on the $1,000 and opera singer Marian Anderson on the $5,000.

Two denominations -- the $200 with Nez Perce Chief Joseph and the $10,000 with Sen. Spark Matsunaga of Hawaii -- will be added in May 1999.

"The design of this new security gave us a rare opportunity to recognize these distinguished individuals whose talent and dedication helped our nation make great strides in knowledge, the arts, civil rights and world peace," Rubin said.

The administration began auctioning inflation-indexed Treasury securities on Wall Street in January 1997. These have been purchased in five-year, 10-year and 30-year maturities, primarily by institutional investors such as pension funds and insurance companies.

It has sold more than $50 billion, including Wednesday's sale of $8 billion in 30-year bonds at a high yield of 3.680 percent. That's down from a high yield of 3.740 percent at the last auction at that maturity, on April 8.

The rules governing I-bonds will be similar to the Series EE bonds, popular with small savers. Except Series EE bonds pay an interest-rate based on the rate on auctioned five-year Treasury notes while I-bonds will pay a two-part interest rate. The first part will be set in reference to auctioned five-year, inflation-adjusted Treasury notes. The second part, adjusted every six months, will be based on the increase in the Labor Department's Consumer Price Index for urban residents.

More information on I-bonds is available on the Internet at www.savingsbonds.gov