The Treasury released the new interest rates for savings bonds this week. Savings Bond Advisor summarized the new rates the best:

Combined with the new inflation component of 3.10% that I told you about in my last Savings Bond Alert, the rate gives new I bonds purchased between now and the end of April a six-month composite rate of 4.52%.

If you own older Series EE bonds, their rates also held steady or went up. EE bonds issued from May 1997 through April 2005 earn a market-based rate, which will be 4.39% for upcoming six-month rate periods. This is 28 points higher than the previous 4.11%.

The rate for EE bonds issued during the next six months, on the other hand, was dropped 10 points to 3.60% from the previous 3.70%.

By end of the October, I had $17,900 in my Treasury Direct accounts, including $700 in EE Bonds and $17,200 in I Bonds (most was acquired last year this time when I bonds were on sale at a teaser rate of 6.73%).

Now given how the new hand was dealt, it is probably time to reflect on my savings bond strategy. EE bonds were a sure no-go -- it is hard to imagine who wants to stick to a rate of 3.60% forever. What's about I bonds?

For one thing, after staying put for 3 times, Fed seems to be sure that inflation is in control, and second, competing offers are abound, some with even more liquidity, like the 5.05% APY at EmigrantDirect's Savings Account (with no minimal) and 5.50% APY at Eloan's (with $5,000 minimal).

More importantly, I started my savings bond investing with the intention to park some of my emergency money in a high-yielding account (remember back then in November 2003, the prevailing money market account only yielded less than 3%). Now that I have access to tons of liquidity from both of my credit card lines and my margin account with Fidelity and Ameritrade (although I choose not to use it for leveraged investment), the need for keeping a dedicated emergency fund is long gone.

Therefore, today I'm redeeming most of my I bond inventory. The proceeds from the redemption will be swept to higher yield savings accounts like Emigrant or Eloan, and sit in the sideline waiting for opportunities to engage in the broader stock market. (By the way, it will probably pay for wait on certain I-bonds for a few months. Read Savings Bond Advisor's analysis on this topic.)